The pipeline scare has one expert bullish on traditional gas stocks
Dan Dicker, the author of 'Turning Oil Green’ and founder of The Energy Word, joined Yahoo Finance to discuss the latest implictions from the Colonial Pipeline cyberattack.
Video transcript
JOE BIDEN: And I also want to say something to the gas stations. Do not-- I repeat, do not-- try to take advantage of consumers during this time. I'm going to work with governors of the affected states to put a stop to price gouging wherever it arises, and I'm asking our federal agencies to stand ready to provide assistance to state-level efforts to monitor and address any price gouging at the pump. Nobody should be using this situation for financial gain.
SEANA SMITH: That was President Biden earlier this afternoon warning gas stations not to raise the price of fuel. We have seen the price of gasoline rise pretty substantially over the past week despite the fact that as of last night, the Colonial Pipeline was brought back online. As of today, the national average for gas price is right around $3.03 a gallon.
We want to bring in Dan Dicker for more on this. He's the founder of "The Energy Word." And Dan, when you take a look at what's going on with the price of gasoline, now it's above $3, the highest that we've seen since 2014. When do you expect some of this craziness to begin to subside?
DAN DICKER: I guess we've seen it today, Seana I mean, crude oil is down $2 and 1/2 today. It's like there's an anti-commodity trend that's running around the markets today for no really good reason. I mean, you'd think that with inflation risks, you know, that commodities would be up. You'd think with the problems that they're having with the pipelines, you know, commodities would be up.
I don't know. I think that Elon Musk had more of an effect over the overall market than just with Bitcoin. I think they're throwing in a lot of the commodities with some of his pronouncements about, you know, this kind of currency, a proxy which includes many of the commodities including copper, and oil, and so forth. A lot of the traders was long.
This has been a bad day for oil and oil stocks. So despite the fact that the general indexes are doing very well, it's a bad day on my end of the ledger, anyway.
ADAM SHAPIRO: I'm sorry you're having a bad day, Dan. But help those of us who know nothing about oil and pipelines understand. I mean, this thing, we're told 45% of the fuel for the East Coast flows through this, and that includes jet fuel. Is this one pipe, or are there individual tubes within the pipe that transport jet fuel, that transport the gasoline I put into my car? How does this work, and why are they telling us, get ready for, for instance, airplane ticket prices to go up because of this pipeline problem?
DAN DICKER: Yeah, there's certain variants of these kinds of refined products that run through these pipelines. And this one, this particular one, the Colonial, is really just for gasoline. There are others that are [? sides ?] that take other refined products, and most of those refined products come by truck, which is part of the reason there's been this kind of gas shortage, particularly in this Virginia, North Carolina basin.
It really does get deep in the weeds. I don't know how far you want to go, but they generally have a pipeline shortage in this general area. It's one of the few places on the East Coast that have just this kind of Colonial Pipeline, and that's just about it, and everything else has to come in from truck. And therefore, you have a lot of people who jump immediately when there's a problem, and they start hoarding gasoline. It makes things worse.
As you can tell, I mean, the problems with hoarding, and big price increases, and gouging aren't really happening anywhere outside of that small section where there's a little bit of a throughput shortage. It's really not bad in New Jersey, or DC, or even in the Southern states where Colonial goes through as well. So this seems to me to be kind of localized. They're making a big story, maybe, about not so much. And I think that generally, you know, if things just calm down and people stop, you know, filling plastic bags with gas, I mean, we're gonna be OK.
SEANA SMITH: So Dan, we have crude off today, like you said. We have gasoline, the national price still about $3 a barrel, but are now moving to the downside today. So hopefully, that will be reflected in the price of gasoline soon. So then, of course, the question is, for investors trying to figure out what's going on and the best ways to play it, where do you see the opportunity now?
DAN DICKER: I think this is just a great opportunity. I mean, every time I see oil down, it's been a great year for energy. I think it's gonna continue to be a fantastic year for fossil fuels. In some ways, you know, this Colonial Pipeline sort of woke people up. It's kind of a slap in the face of reality. I mean, you know, electricity, wind, solar, Teslas-- all this great stuff. But you know, when things really hit the fan, I mean, it's really fossil fuels that people kind of rely upon.
And when you see that, you get kind of this panic kind of vomiting of commodities-- oil, oil stocks, and so forth. A great opportunity to buy some really cheap EMPs. Exxon, you know, always on the top of my list. EOG is down a lot today. I'd be picking some up. You know, there's some good opportunity here today. Particularly in a market that's up so strongly today, you want to be buying stuff that's down that you think has value for the long haul. You don't want to be chasing stuff that's going higher.
ADAM SHAPIRO: Dan, what do you think of the fact that there's-- if it is mostly just gas, and fuel, you know, gasoline, 45% for the East Coast. Why only have one pipeline? Shouldn't we have some kind of redundancy? I mean, they paid $5 million to these criminals, to the hackers, to get the thing back open.
DAN DICKER: [LAUGHS] OK, I'm going to get nasty email because of this, Adam, but you lead me in here, OK? So what's been happening over the course of the last four and five years is that pipeline-- the ability for providers to put new, fresh pipeline into what's in necessary spots like this Virginia, North Carolina spot has been stopped by, you know, environmentalists who have taken out lawsuits and have been very successful in just stopping any kind of new pipelines from being built. And this has had, you know, a major impact.
That's why you have spots where, literally, some of this stuff is old, and crumbling, and not really keeping up with, you know, the infrastructure build-outs that are going on there. And this is stuff that's coming home to roost ever since, you know, Keystone XL had such a success for the environmentalists-- of which I am one, by the way-- but they had such success in terms of lawsuits being able to stop these pipelines, they used that strategy to stop virtually all fossil fuel pipelines over the course of the last three and four years.
And you know, these are the kinds of things that happen. When you have a little problem, for example, with a gasoline pipeline, you know, then natural gas gets pumped, and you get bad basis prices for natural gas because of it. It's all kind of correlated, and we've had sort of a lack of buildout in pipeline where we needed it. You know, there's been overbuilding in places where we haven't needed it, but in particular spots where we have needed it, like here in this particular East Coast spot-- you know, in Virginia and North Carolina-- that's been stopped by environmentalists very successfully. And this is part of the problem that's been- this is what happens when that goes on over the course of years.
SEANA SMITH: Well, Dan, and also just the simple exposure here that we've realized of our energy, of our infrastructure system, to cyber attacks like this. This, of course, has brought up a number of questions, just in terms of what better, or what needs to be done in order to address this and prevent this type of thing from happening again. What's your view on that and how much we could do now in order to prevent something like this from happening, say, just a couple of months from now?
DAN DICKER: Yeah, I'm gonna come up empty for you, Seana, here. I'm really gonna come up empty. You know, this has been something that's been on the minds of energy analysts and, of course, water analysts and people who work at nuclear power plants for-- since 9/11. And you know, as far as I can tell, all you need is a really fast server and a couple of really smart guys.
It doesn't have to be state-run. It can be done, you know, just about anywhere. You can find a place to find a fast server and some smart computer hackers. And I don't know how you get the-- you fix this, but boy, it can be a real problem. You can make a real mess with a very small amount of money.
We saw, you know, Colonial paid. They paid the ransomware to open the pipeline again. And that's gonna give, you know, a lot of impetus for a lot of small fry people to do some more of this in the future. And you know, I don't know how you stop it. I wish I did.
SEANA SMITH: All right, Dan Dicker, always great to speak with you. He's "Turning Oil Green"'s author and also the founder of "The Energy Word."
