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Gasoline Shortages And Price Spikes Are About Choices, Dependency And Infrastructure

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It only lasted a week, but the shutdown of the Colonial Pipeline that supplies up to 45% of the daily gasoline needs to 17 states in the Southeast and along the Atlantic seaboard provided stark reminders of the long gas lines and price spikes Americans suffered during the 1970s. Unfortunately, some of the media coverage of the incident was also reminiscent of a time when the Jimmy Carter administration used the oil and gas industry as a political boogeyman to shift blame for the horrible policy decisions made during that time, and many in the media amplified that message.

The New York Times

NYT
, for example, decided it would be a good idea to end its week of coverage of the cyber attack on Colonial on Friday by publishing a guest opinion piece targeting a favorite boogeyman of the political left, Charles Koch. The piece, written by longtime Koch critic Christopher Leonard, does little to add to public discussion around what the nation should be doing to increase energy security or combat cyber terrorism, but likely did get a lot of clicks from readers who need a boogeyman to blame for everything that happens in the world.

The fact that Mr. Koch owns a piece of Colonial really doesn’t have anything to do with what happened this past week, or what, if any actions policymakers should take in response to it. Colonial was attacked by a cyber terrorist group using ransomware to demand a $5 million payoff, a bit of blackmail that has become sadly common in the 21st century.

Colonial responded as any company in any other industry might do, shutting down its computer system – and thus its pipeline – while its experts searched for the ransomware and cleaned it out. The company also made the decision to pay the $5 million ransom, an act that has drawn some criticism but one that the Biden administration correctly pointed out was a “private sector decision.”

Just 5 days following the attack on its systems, Colonial was able to announce it was restarting its operations, and within 7 days said it had its system fully back up and running. By mid-week next week, gasoline supplies will most likely have returned to normal along its route, which any neutral observer might note represents pretty strong performance by the company in the face of such cyber terrorism.

The lack of any long-lasting impacts from the incident most likely means that, unfortunately, the entire episode will have been forgotten a month from now and little if any follow-up action will take place as a result, other than efforts Colonial itself takes to beef up its cyber security processes.

So, what lessons were learned here? Let’s start that discussion by noting a very significant tweet sent out by Patrick De Haan at Gasbuddy.com, a group that tracks gasoline supplies and prices around the country, Friday evening:

These percentages are all about choices, dependency and infrastructure. The first thing you might note here is that both Texas and Louisiana show 0% outages. This is because, although the Colonial system starts at the refineries that supply most of its gasoline along the Houston ship channel, the states of Texas and Louisiana are home to massive networks of oil and gas infrastructure and are not really reliant on Colonial for much gasoline supply.

At the other end of these percentages you have Washington DC at 88%, North Carolina at 67%, South Carolina at 49%, Georgia at 46%, and Virginia at 43%. What do all of these states and the District of Columbia have in common? According to the U.S. Energy Information Administration, none are home to a single operable oil refining operation.

This leaves them entirely dependent on imports of gasoline from other states, either via pipelines like Colonial or thousands of trucks and rail cars bringing it to their cities and towns each day. Even Energy Secretary Jennifer Granholm admitted this week that pipelines are the safest and cleanest way to move fuel, but if your state is reliant on a single pipeline for more than half of your daily supply, as North Carolina is, then when that pipeline goes down for any reason, you are going to have a shortage of gasoline. This is not rocket science.

No one has forced North Carolina or any of these other states to become so reliant on a single pipeline. That’s a conscious decision that policymakers in those states have made over a very long period of time, not the result of machinations behind the scenes by Charles Koch or some other convenient boogeyman. Colonial is like any other pipeline – it exists to supply a demand from its customers, and does that quite efficiently 99% of the time.

It’s important to remember here that it has been less than 4 years since every one of those states experienced gas shortages and price spikes in the wake of Hurricane Harvey, when the Texas/Louisiana refineries that supply Colonial were forced offline for weeks due to the massive flooding that storm produced. If they wish to advance the public dialogue about what to do about all of this, perhaps media outlets in North Carolina and those other states – and maybe even the New York Times – should be asking state policymakers if they took any action to diversify their state’s infrastructure for gasoline supply in the wake of that outage.

Given what those states experienced this past week, it’s safe to assume that the answers to that question would be very short, or possibly even non-existent.

This isn’t about boogeymen. This is about choices, dependency and infrastructure. If we could all focus the discussion on that, who knows, we might even come up with some solutions.

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