supply disruptions, and such disruptions are likely to affect market prices, potentially causing price shocks. The likely magnitude and duration of these price shocks, however, has not been addressed in the research literature. There has been some analysis of their potential macroeconomic effects. Hamilton (2003, 2008), reviewing six decades of oil price and macroeco-nomic data, reported a very strong relationship between oil price shocks and recessions. To the extent that economic disruptions drive political instability (see, e.g., Alesina et al., 1996), it is plausible that an oil price shock could increase instability, particularly in a situation that is already politically sensitive. However, little research to date has directly addressed the political impacts of energy price shocks, whether caused by climate-related supply disruptions or other factors. These possibilities deserve more careful empirical analysis, particularly as energy markets continue to tighten with increased consumption from Asian nations and as risks increase of climate events disrupting energy supplies.
Strategic Product Supply Chains
Over the past few decades the globalization of many industries has been accompanied by a streamlining of their supply chains in order to reduce costs. However, as a 2012 World Economic Forum publication noted, “the focus on cost optimization has highlighted the tension between cost elimination and network robustness—with the removal of traditional buffers such as safety stock and excess capacity” (p. 10). Climate events can thus be a source of major disruptions in world markets for critical non-food commodities. Such events are counted as one of the major risks to be addressed in the U.S. National Strategy for Global Supply Chain Security, released in January 2012 (White House, 2012).
Although not attributed to the effects of climate change (Peterson et al., 2011), the floods in Thailand in 2010–2011 illustrate how an extreme climate event that stresses a government’s ability to respond can have global consequences. Much of Thailand, including portions of the capital Bangkok and its surrounding manufacturing districts, was flooded for extended periods between July 2011 and January 2012. The flooding resulted in more than 800 deaths, affected 13.6 million people, damaged 7,700 square miles of farmland, and caused more than $45 billion in economic losses (World Bank, 2011).
Thailand is a flood-prone country with an extensive system of dams, drainage canals, levees, and other flood-control systems, but a series of events in 2011 overwhelmed this system. The most immediate event was the abnormally high rainfall that year. In March 2011, for example, the rainfall in northern Thailand was more than three times the mean level. The abnormally low rainfall of 2010 was another contributing factor. The