Last Friday, the Colonial Pipeline Company got hit with a cyberattack shutting down the pipeline and almost half of the gas supply. The pipeline isn’t just a pipe, but a series of high-tech sensors, thermostats, valves and pumps controlled digitally making the pipeline subject to outside cyberattacks.
The Colonial pipeline is 5,500 miles long and supplies 2.5 million barrels per day of refined fuel to 10 states between Texas and New Jersey. It supplies 45% of the gasoline for these states.
People in the affected states sopped up gasoline like a biscuit in hot gravy, driving gas prices through the roof. Gas stations quickly ran out of gas. Humans are emotional creatures and tend to overreact like Chicken Little believing the sky is falling. Remember the toilet paper shortage during the early stages of Covid? Same thing happening here.
By now, we’ve all seen the memes. The gas cans. The gas bags.
And if you filled up your own gas tank this week, you’ve definitely felt some pain, with gas prices soaring above $3 per gallon for the first time in 7 years.
The good news is, I can also help you find some serious upside…
The Hidden Variable That Will Keep Driving Gas Through The Roof
First, let’s take a quick look at the pipeline itself.
Source: Fox News
The truth is, there is plenty of gasoline supply along the Colonial pipeline states to ride the tide as Colonial restores the integrity of their electronic infrastructure. Indeed, Colonial has already resumed services.
But although the pipeline is back online, we aren’t out of the woods yet.
There is currently a national shortage of truck drivers. Demand for consumer goods remains high stressing an already stressed-out trucking industry. They can’t deliver goods fast enough. Of course, these goods include gasoline. Less truckers to deliver gas means less supply. With an ever-present demand for gas, this means one thing… higher prices.
The simplest way to trade rising gasoline prices is to trade gasoline.
If you’re a futures trader, you could simply trade the RBOB gasoline futures contract.
If not, don’t worry. The United States Gasoline Fund ETF (NYSE: UGA) tracks U.S. gas prices and that’s another way to go.
Check out the UGA chart below:
As you can see, the UGA has been on the rise since Halloween 2020 and is now at 3 ½ year highs. Of course, you’ve seen prices at the pump and already know that.
If supply continues to be constrained, expect UGA to rise from here.
And please, as a friendly reminder, hoard this ETF, not gas.