Will a Hacked Pipeline or Other Contingency Disrupt Your Fuel Supply Chain?
Cyber Terrorists Bring Down Colonial Pipeline
The Colonial Pipeline moves over 2.5 million barrels of refined fuels each day1 and is a critical supply artery connecting Texas refineries to points along the east coast. Recently, the pipeline operator was the subject of a ransomware attack perpetrated by a group of hackers called Darkside.
Colonial proactively shut down its operations on Friday, May 7, after discovering the attack and paying a 75 Bitcoin ransom to Darkside. The closing of this vital infrastructure led to shortages and price increases across the Atlantic region. On May 12, 70% of stations in North Carolina and 47% of stations in Georgia were without fuel (according to GasBuddy). Cybersecurity concerns aside, this incident highlights what a non-traditional disruption can do to the fuel supply chain and those that depend on it.
Implications for C-Stores and Fleet-Based Companies
For those businesses that depend on fuel, this is a nightmare scenario. This type of disruption does not have a playbook or expectation of how long it will last, leaving businesses to scramble for fuel to fill tanks. This disruption led Depots to go on allocation, which put business without contracts or a supplier who was not dependent on Colonial in a challenging position. As many know, businesses without contracts fall to the back of a long line of those looking to get fuel from an impacted Depot. For those businesses that depend on fuel for their livelihood, having strong supplier relationships is critical and could mean the difference between staying operational or placing bags over your pumps.
Security of Your Fuel is Critical
Fuel-dependent businesses need the security of supply to keep operational even when there isn’t a crisis affecting the market. Relationships with key suppliers are critical for this security, including fuel contracts and ensuring that those agreements are current. Insite360 advises our clients to contract a minimum of 80% of their annualized fuel purchase as a rule of thumb. This allows customers to have a line of sight to their overhead while offering 20% for spot purchases to take advantage of favorable market conditions.
Contracting for your fuel needs allows customers security when the supply tightens as sellers prioritize those in good standing with existing agreements. Not having a contract or not being current will put you at a disadvantage when supply must be rationed by moving you to the back of a very long queue.
Engaging with an Experienced Team Can Help
For businesses that could use help with better fuel supply relationship management and handling the myriad of details related to fuel supply logistics, engaging with experienced fuel supply experts could make a real difference. These experts walk you through establishing good fuel contracts that help protect the organization against supply disruptions and build essential relationships with key fuel supply partners.
As part of a fuel supply portfolio, this contract is based on a percentage of fuel usage for the life of the contract, with a percentage typically left off the contract that can be used for spot purchases to take advantage of favorable market conditions. Once these relationships are established, they must be maintained to remain in good standing. Establishing and maintaining relationships with key suppliers will provide a more stable fuel supply for the business and is crucial for establishing a fuel portfolio that supports the business.
If creating a fuel supplier portfolio focused on the needs of the business is not something that your organization has done, now is the time to address it before the next big disruption that impacts your fuel supply.
As a recognized marketing leader in the cybersecurity arena, Nathan Baker has helped develop and launch several B2B-focused security solutions. With a highly varied business background, Nathan has experience reducing friction and increasing cybersecurity threat detection in healthcare, financial services, and enterprise software. He currently leads marketing for Insite360.