Top U.S. fuel pipeline operator Colonial Pipeline has shut its entire network, the source of nearly half of the U.S. East Coast's fuel supply, after a cyber attack that the company said was caused by ransomware.
The company transports 2.5 million barrels per day of gasoline, diesel, jet fuel and other refined products through 5,500 miles (8,850 km) of pipelines linking refiners on the Gulf Coast to the eastern and southern United States.
Colonial shut down systems to contain the threat after learning of the attack Friday, it said in a statement. That action has temporarily halted operations and affected some of its computing technology systems, the company said.
While the U.S. government investigation is in its early stages, one former U.S. government official and two industry sources said the hackers were most likely a highly professional cybercriminal group. Investigators were looking into whether a group dubbed "DarkSide" by the cybersecurity research community is responsible, the former government official said.
DarkSide is known for deploying ransomware and extorting victims, while selectively avoiding targets in post-Soviet states.
Ransomware use rising
Ransomware is a type of malware that is designed to lock down systems by encrypting data and demanding payment to regain access. The malware has grown in popularity over the last five years.
Colonial engaged a third-party cybersecurity firm to investigate and contacted law enforcement and other federal agencies, it said.
Cybersecurity company FireEye has been brought in to respond to the attack, the cybersecurity industry sources said. FireEye declined to comment when asked if it was working on the incident.
The U.S. Transportation Security Administration told Reuters it was working with other agencies on the situation.
Colonial did not give further details or say for how long its pipelines would be shut.
"Cybersecurity vulnerabilities have become a systemic issue," said Algirde Pipikaite, cyber strategy lead at the World Economic Forum's Center for Cybersecurity.
"Unless cybersecurity measures are embedded in a technology's development phase, we are likely to see more frequent attacks on industrial systems like oil and gas pipelines or water treatment plants," Pipikaite added.
"As every day goes by, it becomes a greater and greater impact on Gulf Coast oil refining," said Andrew Lipow, president of consultancy Lipow Oil Associates. "Refiners would have to react by reducing crude processing because they've lost part of the distribution system."
Possible outages at terminals
If the system is shut for four or five days, the market could see sporadic outages at fuel terminals that depend on the pipeline for deliveries, he said. Gulf Coast prices could weaken further, while prices in New York Harbor could rise, one market participant said, gains that could portend increases at the Northeast pumps.
The American Petroleum Institute, a top oil industry trade group, said it was monitoring the situation.
Oil company Exxon Mobil said its Gulf Coast plants were operating normally, and a Royal Dutch Shell spokesman declined to comment.
U.S. Senator Ben Sasse, a Nebraska Republican and a member of the Senate Select Committee on Intelligence, said that the cyberattack was a warning of things to come.
"This is a play that will be run again, and we're not adequately prepared," he said, adding lawmakers should pass an infrastructure plan that hardens sectors against these attacks.
Colonial had previously shut down its gasoline and distillate lines during Hurricane Harvey, which hit the Gulf Coast in 2017. That contributed to tight supplies and gasoline price rises in the United States after the hurricane forced many Gulf refineries to shut down.
East Coast gasoline cash prices rose to the highest since 2012 during Hurricane Harvey and have not gone higher since, while diesel prices rose to a more than two-year high, Refinitiv Eikon data showed.