Shortages, Prices Spikes Possible After NJ Gas Pipeline Shutdown

NEW JERSEY — Shortages and price spikes are possible now that an emergency has been declared in New Jersey after a cyberattack prompted a major gas pipeline shutdown.

Drivers are seeing price increases at the pump as gas averages have increased at least 8 cents in many areas, according to the Automobile Association of America. Over the past week, New Jersey's gas prices have climbed 8 cents.

If the trend continues, an increase of three more cents would make the national average the most expensive since November 2014 –the last time average prices were at $2.99 and higher, the association said. New Jersey's current average is $3.03.

Gov. Phil Murphy may address the matter during his 1 p.m. news conference on Wednesday. Read more: WATCH LIVE: Gov. Murphy Issues NJ Coronavirus, Reopenings Update

As New Jersey heads into the Memorial Day holiday weekend, the region will likely see gas prices continue to increase in part due to higher demand. As demand increases, gas stations are working to adjust delivery schedules to keep pace, according to Tracy Noble, the New Jersey public relations manager for the Automobile Association of America.

However, there have been instances where some stations are seeing low to no supply at pumps for a few days due to delayed deliveries, Noble said.

Over the holiday weekend, some gas stations in popular travel destinations — like beaches and mountain areas — may experience this situation, she noted.

Currently, the Colonial Pipeline, which delivers 45 percent of fuel to the East Coast, is offline due to the cyberattack, which will contribute to temporary price increases and limited fuel supply, Noble said.

She noted that the owner of the pipeline gave a goal of substantially restoring operational service by the end of the week.

Panic buying, or the "hoarding" of gasoline, may also be contributing to shortages and U.S. officials – including President Biden – sought to reassure the public that they expect to have the issue resolved as quickly as possible.

Tom Kloza, the head analyst for Oil Price Information Service, said that despite warnings to stay calm, stations in southeastern states impacted by the Colonial Pipeline shutdown are now seeing daily sales volumes two or three times the normal pace, leading to outages at many points.

Emergency conference calls have been underway with marketer associations from Alabama, Georgia, Florida, the Carolinas, Virginia, Maryland and Tennessee, he said.

Marketers are struggling with how to address a consumer panic that can lead to a "self-fulfilling prophecy" of little fuel availability, Kloza said. Some have tried limiting customers to 10 gallons or $30 worth of fuel but find that such action incurs customer wrath as well as confusion between the pumps and inside the store.

To try and offset any additional shortages the U.S. regulators said Tuesday they are temporarily suspending clean fuel requirements in several states and the nation's capital to ease a gasoline shortage caused by the hacking shutdown.

The waiver is meant "to address the fuel supply emergency caused by a cyberattack on Colonial Pipeline's computer networks that led to the pipeline's shutdown," Environmental Protection Agency Administrator Michael Regan said in a letter to the governors of Maryland, Pennsylvania and Virginia and the mayor of Washington.

Earlier this week, the Federal Motor Carrier Safety Administration declared an emergency in response to the "unanticipated shutdown" of the Colonial pipeline, which supplies gasoline, diesel, jet fuel and other petroleum products through New Jersey and other impacted states and territories.

The impacted states and territories also include Alabama, Arkansas, District of Columbia, Delaware, Florida, Georgia, Kentucky, Louisiana, Maryland, Mississippi, New York, North Carolina, Pennsylvania, South Carolina, Tennessee, Texas and Virginia.

NBC News reported that a "Russian criminal group" may be responsible for a ransomware attack that shut down the major U.S. fuel pipeline, two sources familiar with the matter said Sunday. The group, known as DarkSide, has a "sophisticated approach to the business of extortion," the sources said.

The emergency declaration provides for regulatory relief and assistance in supporting emergency relief efforts to transport gasoline, diesel, jet fuel and other refined petroleum products into New Jersey and other affected states.

Colonial Pipeline Co. said it learned it was the victim of a cybersecurity attack and has since determined that the incident involved ransomware.

Quickly after learning of the attack, Colonial said it "proactively took certain systems offline to contain the threat."

"These actions temporarily halted all pipeline operations and affected some of our IT systems, which we are actively in the process of restoring," the company said.

Cybersecurity experts were immediately engaged after discovering the issue and launched an investigation into the nature and scope of the incident, the company said.

"We have remained in contact with law enforcement and other federal agencies, including the Department of Energy, who is leading the Federal government response," the company said.

Maintaining the operational security of the pipeline, in addition to safely bringing systems back online, remains the company's highest priority, Colonial said. Over the past 48 hours, Colonial pipeline personnel say they have taken additional precautionary measures to help further monitor and protect the safety and security of its pipeline.

"At this time, our primary focus continues to be the safe and efficient restoration of service to our pipeline system, while minimizing disruption to our customers and all those who rely on Colonial Pipeline," the company said. "We appreciate the patience and outpouring of support we have received from others throughout the industry."