The blog's recent White Paper, 'Budgeting for Uncertainty', warned that "geo-political issues have been quiet recently, but the potential for Middle Eastern conflict cannot be ignored, with its potential to impact oil supply and prices".
Just a few weeks later, they have now taken centre stage.
Libya is the main issue, and events there are being used by speculators to hype oil prices above $100/bbl. But, even if one ignores the fact that oil inventories are at high levels, their argument is still not very convincing:
• Libya supplies only 1.8% of global output (1.6mb/d)
• The Saudis have already said they will replace this volume if necessary
• The fact of it being 'light crude' is also a diversion
• Plenty of refinery capacity currently exists to process all types of crude
The real threat is medium-term, as the blog's N African contacts note:
• Libya is a key supplier for the future
• The Gaddafi regime is very centralised, with only tribal structures outside it
• It is also toxic, with many countries most unwilling to provide refuge - it is rumoured that even Mugabe in Zimbabwe is not keen to host the family
• Therefore whilst we might see them depart for a minor African state, there could be a bloody end
Thus there is a serious risk that the country could soon break up and become a 'failed state'. Insurgents have been operating in the south for years. And if they were now to link up with groups in Algeria, Tunisia and Morocco, there is the potential for a major uprising in a belt across the Sahara.
In turn, this would make oil E&P (Exploration & Production) very difficult, thus potentially reducing Libya's role as a key future supplier.
In the meantime, of course, we also have to deal with today's world. Driven by the speculators, oil markets are already buzzing with talk of prices jumping to $140/bbl, or even higher.
This, as always, would lead to recession, just at the time when a tentative economic recovery is underway. Asian GDP growth would fall 1-2%, for example: SE Asia would be spending ~15% of national budgets on subsidies.
Hopefully, policymakers are alert to this problem, after the experience of 2008/9, and will take steps to prevent a repeat performance. But whether they do or not, it is clear that economic and geo-political risks are rising.
Thus the blog maintains its White Paper advice to Boards and business managers, that time spent today in Scenario Planning will probably be the best investment they will make all year.