Regina Mayor, KPMG Global Head of Energy joins the Yahoo Finance Live panel to discuss the latest with The Colonial Pipeline which is expected to “substantially” reopen within days.
AKIKO FUJITA: Colonial Pipeline, the country's largest fuel pipeline, isn't expected to reopen substantially until the end of the week after a ransomware attack caused major disruptions. The AAA is now warning that disruption could lead to a price hike at the pump. Let's bring in Regina Mayor, KPMG Global Head of Energy.
Regina, it's good to talk to you today. What do you see right now in terms of the immediate impact from this disruption? How significant a hike are we talking about in terms of gas prices?
REGINA MAYOR: Well, I think it could be a pretty substantial hike in localized areas depending on how much supply becomes constrained. But I don't expect a long-term disruption, because it's important to note that this is just a distribution disruption, it's not an overall supply contraction. But I do think we'll see a short-term, pretty substantial price hike in key areas. But then I think we won't see any outages.
ZACK GUZMAN: Yeah, I mean, when we talk about the issues around it, I mean, this is one pipeline to consider. But I guess the cyber threat in a lot of America's infrastructure maybe had been overlooked. I mean, when it comes to you responding to this if it were to happen again, people have been noting that, you know, we've just got the whole East Coast to work with-- you got the Atlantic Ocean there to maybe help in terms of distribution here. What is your kind of breakdown if we do see this happen again-- America's readiness to kind of circumvent whatever issues we see this time around?
REGINA MAYOR: Well, I think there's sort of two things that you just said there, Zack. One is, how do we prevent it in the future? Because I do think this does point to energy system weaknesses that we have. Just as winter storm Urie exposed energy system weaknesses in our grid infrastructure, this is showing weaknesses to cyber attacks in our pipeline infrastructure, which is really critical to enable us to move around the world, and move around the country, and do the things that we want to do post-pandemic.
But we have the ability to respond if we are disrupted. You pointed out, there's other routes to market. I think it's interesting to note that no one has asked the administration yet to provide a Jones Act waiver, which would allow any sort of tanker ship to move product from the Gulf Coast into the East Coast market. We might see that if Colonial is not able to get up operating by the end of this week as they anticipate.
So I think the industry feels like it's relatively resilient. But we have to be prepared and start to harden the infrastructure and protect the infrastructure for the future.
AKIKO FUJITA: Yeah, I mean, let's talk about what needs to be done there, because it does seem like, to your point, when you talk about sort of patching up distribution outlets, that feels like a bit of a Band-Aid solution. You see the vulnerabilities in the grid here. What kind of investments are we talking about that need to be done to really beef up security there?
REGINA MAYOR: Well, I think it's going to heighten the industry's focus on cyber, which they're already hyper-focused on it already. Utilities look at, you know, these kinds of attacks that could potentially create vulnerabilities in the distribution grid for electricity, similarly for crude and pipeline. And heaven forbid, the worst case would be it gets taken over and there's some sort of damage to the equipment.
This did not happen in this case. And so I think we're seeing an early warning sign of what could come. I would like to see the country reinvest in pipeline infrastructure. You've seen a lot of controversy about new pipelines going in, and I think this shows that we don't have enough pipeline infrastructure and we probably could use investing more.
AKIKO FUJITA: Regina Mayor, KPMG Global Head of Energy, good to talk to you today.