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Colonial pipeline shutdown to keep volatility across the commodity space: Prosper Trading Academy CEO

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Scott Bauer, Prosper Trading Academy CEO, joins Yahoo Finance Live to discuss impacts from one of America's largest pipelines shutting down after being hit by a cyber attack.

Video Transcript

ALEXIS CHRISTOFOROUS: Let's bring in Scott Bauer. He is CEO of Prosper Trading Academy. So, Scott, I think people were bracing themselves for gas prices to surge after the news of this ransomware attack. What do you think the state of things are right now, and what can we expect at the pump in the days and weeks ahead?

SCOTT BAUER: Yeah, I would say people were expecting the worst. And so far-- it is an awful thing that has happened-- so far from the economic impact of things, we haven't really seen it yet. And the fact that Colonial is saying that, you know, some point this week-- and I think Wednesday, personally, is probably too soon-- some point this week they expect to be online almost 100% is a very good thing.

Now, that being said, you absolutely, looking at the futures markets last night, as Jared was referring to, you had people running in there expecting huge bump-ups in both crude and in gasoline. And as he mentioned, they're really bold down on the day today. For crude, though, when I look at a chart on crude, It's almost as if it hit this area of resistance, which we hit on March 7.

We hit that high of 65, 66, whatever it was exactly on March 7. And we almost approached that last night and then sold off of there. The gasoline futures were trading as high as they traded since May of 2018. And as Jared said, now they're unchanged on the day.

So you know, I think right now, it's almost a wait and see. If we get back online-- whether it's Wednesday, Thursday, or even Friday-- I actually think we see both crude and gasoline futures much lower than they are right now. If something happens and this thing gets extended, then look for a breakout to the upside.

KRISTIN MYERS: So, Scott, I'm curious to know how much these types of attacks-- cyber attacks, the vulnerabilities that do exist in some of the infrastructure-- how much they present some headwinds going forward to the oil markets?

SCOTT BAUER: You know, I don't know if it's going to present as much headwind as it will keep volatility in the marketplace. There's no doubt about it. This is now front and center. And certainly, the hack triggers major, major worries across the globe, quite frankly, of vulnerabilities of the US energy infrastructure.

So I think we're going to see continued volatility. We're obviously going to see out of Washington and elsewhere, this could be front and center for the next months, or even years, trying to remedy the situations here. In terms of pricing, until we see a potential next attack somewhere, which hopefully we don't, I don't know that this is going to impact the commodity space, really. However, like I said, this is going to remain present for quite a while and should keep volatility across the commodity space for quite some time.

ALEXIS CHRISTOFOROUS: You know, Scott, you mentioned a possibly another attack. And I think that's the great unknown here for traders. You know, do you think that? Because it does underscore just how vulnerable our oil infrastructure is-- not just here, but globally, as you said. Do you think we're going to see copycat crimes? And how can these places best insulate themselves going forward?

SCOTT BAUER: I mean, that's certainly not out of the question. When we see one when this has happened in the past, there seems to be some repeat offenders, if you will, in the copycats, like you said. You know, every company out there and the government as well is going to be pushing the button now and pushing the timeline to accelerate security to, you know, to get firms in there to try and stop this, which, you know, from my very limited knowledge about cyber-security, it's almost impossible to stop.

So yes, I would think that it's going to happen again. And hopefully, it remains to the point where they remain just ransom type of situations as opposed to destruction, like Jared was referring to earlier-- like what we see in the Middle East where, god forbid, there's a pipeline that's actually physically blown up where things are completely shut down. So you know, is it a great situation to be in? No, it's the better, though, I guess, of two situations-- ransomware versus a physical attack.

KRISTIN MYERS: Yeah, I think physical but also cyber-attacks are, obviously, nothing new in the oil space. Curious, however, if you think a lot of these companies going forward, if we're going to hear a lot more money being spent, investment being spent to really kind of ward off some of these attacks in the future.

As you mentioned, you think that there is a possibility that something like this could happen again. Do you think that companies are going to start really ponying up a lot of cash to really make sure that they don't happen?

SCOTT BAUER: Absolutely. I do think that that will happen. I don't know that it's going to financially impact many companies in terms of dividend risk or anything like that. Certainly, it can affect future earnings growth-- future bottom line. However, I would think, quite frankly, as a trader that-- I'm just throwing this out there-- a Marathon, an Exxon, whomever that might be-- if they said that they were stepping up their cost structure to protect their infrastructure, I think that could actually be taken as a positive in terms of stock prices for many of these companies.

ALEXIS CHRISTOFOROUS: All right, Scott Bauer, CEO of Prosper Trading Academy, thanks so much for shedding a little light on that today.