Energy infrastructure may be more vulnerable to cyberattacks in next decade, warns Wells Fargo’s John LaForge

Fossil fuel companies may become increasingly vulnerable to cyberattacks over the next decade as investors move away from traditional energy producers in favor of renewable energy, according to John LaForge, director of global real asset strategy at Wells Fargo Investment Institute.

Oil and gas producers risk a lack of capital for the cybersecurity improvements necessary to keep up with hackers. The recent cyberattack on the Colonial Pipeline shows the havoc criminals could wreak by suspending US energy infrastructure operations, LaForge said in an interview on Tuesday. “This is an area that Americans really rely on,” he said.

The US still generates 87% of its energy from fossil fuels. The transition to renewable sources like wind and sun is likely to take decades, according to LaForge, although investors increasingly prefer clean energy. Traditional power plants could become “stranded”, he said, as investors steer clear of oil to make profits on renewable energy instead.

The wealth flowing into renewable and sustainable exchange-traded funds has increased in recent years, while the weight of the traditional energy sector is in the S&P 500 index
SPX, -0.85%
is down from more than 13% in 2009 to less than 3%, as shown in its report on Monday’s real wealth.

“You have to imagine that the next decade will be a lot removed from fossil fuels,” LaForge told MarketWatch. “There will likely be more holes and areas to be hacked into in the future.”

This month’s cyberattack on the Colonial Pipeline, which supplies gasoline along the east coast, gave a glimpse into the Chaos that could arise should hackers succeed in switching off the energy infrastructure. Gas shortages spread to the southeast and many gas stations emptied before Colonial, which operates the largest gasoline pipeline in the United States, announced over the weekend it resumed “normal operation”.

“It only took a week to throw everything off balance,” said La Forge.

Read: This is what the colonial pipeline’s cyberattack means for the energy markets

The energy sector represented in the S&P 500 index consists largely of oil and gas producers. These energy companies also have to worry that lower oil prices could affect their ability to reinvest in cybersecurity, LaForge said.

Crude oil prices
CL00, -0.26%
declined during pandemic shutdowns last year. Though oil futures fell on Tuesday US prices fell from their highest target in more than two years. West Texas Intermediate crude for delivery in June fell 78 cents, or 1.2%, to trade at $ 65.49 a barrel on the New York Mercantile Exchange.

“It just seems pretty obvious that this is going to be an area at risk for the next decade,” LaForge said of companies that need to use fossil fuels to protect their assets from hackers.

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