Last week’s cyberattack on the Colonial Pipeline, which supplies gasoline, diesel and jet fuel along the U.S. east coast, is being seen as yet another red flag – not just for homeowners. energy infrastructure, but also for all those who depend on it. .
The problem occurred less than three months after a The winter storm destroyed much of Texas’ power grid – a very different, but much bigger, disruption to the U.S. energy system. It has become clear how vulnerable the country’s energy supply is to threats.
The attack on Colonial rightly led to demands for better cybersecurity. But more secure systems will not get us far. Potential thieves are continually finding new ways to get around them. So, in addition to making infrastructure harder to attack, governments and industry must also find ways to reduce the severity and impact of future breaches.
A number of solutions have been proposed to achieve this. Environmental groups have called for a faster transition away from fossil fuels; oil industry advocates have spoken out against anti-pipeline protesters and the closure of refineries in eastern states; and the coal industry has touted its out-of-favor fuel as a “valuable insurance policy” against future hacks.
Each of these programs has its own problems.
Renewable fuels may well be more resilient than fossil-based systems, says Wenonah Hauter, executive director of the environmental group Food and Water Watch. But the massive transition needed for everyone to drive electric vehicles is going to take time. While my colleagues at BloombergNEF see 82 million electric vehicles on American streets by 2040, that will still only represent just over 40% of cars and trucks.
The oil industry is pushing for more pipelines, but it will only be effective in reducing risk if we are willing to introduce (and pay for) redundancy. It never made economic sense to run a pipeline below capacity – Colonial is a a lucrative cash cow for its owners – and anyone who builds a new line parallel to Colonial will want to fill it. Therefore, someone is going to have a salary to keep one, or both, partially empty, if they are to mitigate the impact of any future disruption. Perhaps this cost can be viewed as an insurance premium.
Greater reliance on coal would also not help much in mitigating the impact of cyber attacks. Yes, coal can be useful for generating electricity when other sources are down, but as I noted before, coal power didn’t work very well to power things like cars.
Perhaps more refineries on the east coast would have alleviated the problem, but again, this appears to be an expensive solution to a relatively minor problem. Four of the seven factories located along the Delaware River south of Philadelphia have been closed or put on hold because they were not economically viable. Without a change in the economy, they will not reopen.
Given these challenges, I believe that there is a much simpler and faster solution to preventing future colonial-type problems: a strategic stock of refined products.
America’s strategic oil stock has not been fit for purpose for at least a decade. Comprised of four sets of salt caverns, all located along the Gulf Coast and containing crude oil, the Strategic Petroleum Reserve is ill-suited to meet the needs of consumers, who require the refined fuels they put into their tanks, and refineries on the West Coast or anywhere far from the Gulf region.
The International Energy Agency requires member countries to hold at least 90 days of net imports. The SPR currently holds 2.5 times that level of crude, but the country’s strategic inventory of refined products is paltry.
The refined stocks that exist are concentrated in the north. the North-East Heating Oil Reserve owns 1 million barrels of ultra-low sulfur distillate (diesel) in Boston, New York and Connecticut, and the Northeast Gasoline Supply Reserve contains a similar volume of fuel. Neither appears to have been exploited during the colonial shutdown, possibly because supply shortages were felt much further south.
While governments and businesses should certainly strengthen IT systems to prevent a similar cyberattack, efforts should also be made to limit the impact when it inevitably occurs. The best way to do this might simply be to build a stronger network of strategic reserves of refined products across the country.
Not only would that make it easier to supply gas stations, but it would be much cheaper and easier to build than a pipeline running along the 5,500 mile Colonial.
This column does not necessarily reflect the opinion of the Editorial Board or of Bloomberg LP and its owners.
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Nicole torres at [email protected]