As summer begins, the prospect of several simmering energy-flashpoints exploding on the world stage has governments scrambling to preempt the effects of supply shocks. From Iran to the Far East, potential conflicts could destabilize markets and force governments to step up regulation and intervention - or in the US’s case - to enact an oil and gas windfall tax. Today’s GR Insight takes a look at areas on the brink of crisis and expected reactions from governments around the world.

The attention of much of the American public is focused on the effort to stem the leak in the Gulf of Mexico, but there are a range of stories from around the globe that will be energy flashpoints during the summer of 2010 – and have the potential to negatively impact a still fragile global economic recovery.  Whether be it the calls for a windfall profits tax on oil production emanating from Capitol Hill, the risk of Gulf hurricanes, fallout from the flotilla incident off the coast of Israel, the debt crisis in Europe, the stalled debates over an energy bill in the US Senate (actually set back by the spill in the Gulf) – all problems that could either lead to or be exacerbated by oil price spikes this summer – some of the biggest stories of the summer have not received the attention they deserve.  These events are destabilizing in their own terms, and are also driving a regulatory backlash and additional government interventions that are going to change the business landscape significantly.  Political tensions in the run-up to the US midterm elections are running high; extensive investigative probes into the fallout of the accident in the Gulf are ongoing; the downturn in the global markets last week has shaken confidence; fear of military action in the Middle East has been renewed; and governments around the world, trying to respond, are finding themselves overstretched.  It is going to be a long, hot summer.

Hurricane Season & The Political Reaction

The proximate threat is that a hurricane will hit the Gulf while efforts to contain the spill are ongoing.  The 2010 hurricane season just began on June 1st, and forecasters are already predicting the worst year for hurricanes since 2005 – the most active season in recorded history.  Scientists expect up to 23 named storms this summer, and never in recorded history has the Gulf Coast escaped hurricane season unscathed.

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