Increased Violence Reflects an Energy Problem

Why are we seeing so much violence recently? One explanation is that people are sympathizing with those in the Minneapolis area who are upset at the death of George Floyd. They believe that a white cop used excessive force in subduing Floyd, leading to his death.

I believe that there is a much deeper story involved. As I wrote in my recent post, Understanding Our Pandemic – Economy Predicament, the problem we are facing is too many people relative to resources, particularly energy resources. This leads to a condition sometimes referred to as “overshoot and collapse.” The economy grows for a while, may stabilize for a time, and then heads in a downward direction, essentially because energy consumption per capita falls too low.

Strangely enough, this energy crisis looks like a crisis of affordability. The young and the poor, especially, cannot afford to buy goods and services that they need, such as a home in which to raise their children and a vehicle to drive. Trying to do so leaves them with excessive debt. If the affordability problem changes for the worse, the young and the poor are likely to protest. In fact, these protests may become violent. 

The pandemic tends to make the affordability problem worse for minorities and young people because they are disproportionately affected by job losses associated with lockdowns. In many cases, the poor catch COVID-19 more frequently because they live and/or work in crowded conditions where the disease spreads easily. In the US, blacks seem to be especially hard hit, both by COVID-19 and through the loss of jobs. These issues, plus the availability of guns, makes the situation particularly explosive in the US.

Let me explain these issues further.

[1] Energy is required for all aspects of the economy.

Energy is required by governments. Energy is required to operate police cars. Energy is required to build schools and to operate their heating and lighting. Energy is needed to build and maintain roads. Tax revenue represents available funds to buy energy products and goods and services made with energy products.

Energy is needed for any type of business. Operating a computer requires electricity, which is a form of energy. Heating or cooling a building requires energy. Growing food requires solar energy from the sun; liquid fuel is used to operate farm machinery and trucks that transport food to the locations where it is sold. Human energy is used for some of these processes. For example, human energy is used to operate computers and farm machinery. Human energy is sometimes used to pick the crops, as well.

Wages paid by governments and businesses indirectly go to buy energy products of many kinds. Food is, of course, an energy product. The heat to cook or bake the food is also an energy product. Metals of all kinds are made using energy products, and lumber is cut and transported using energy products. With sufficient wages, it is possible to buy or rent a home, and to purchase or lease an automobile.

Interest rates indirectly reflect the portion of goods and services produced by energy products that can be transferred to parts of the system that depend on interest earnings. For example, banks, insurance companies and those on pensions depend on interest earnings. If interest rates are high, benefits to pensioners can easily be paid and insurance companies can charge low rates for their products, because their interest earnings will help offset claim costs.

Interest rates are now about as low as they can go, indicating a likely shortage of energy for funding these interest rates. The last time interest rates were close to current levels was during the Great Depression of the 1930s.

Figure 1. Ten-year and three-month US Treasury interest rates, in chart made by FRED.

[2] When there is not enough energy to go around, the result can be low commodity prices, low wages and layoffs.

This is not an intuitive result. Most people assume (low energy = high prices), but this is the opposite of what actually happens. The problem is that the amount workers can afford to pay for finished goods and services needs to be high enough to make production of the commodities used in making the finished products profitable. When affordability falls too low, the system tends to collapse.

We are really dealing with a two-sided problem. The prices of commodities such as oil, wholesale electricity, steel, copper and food tend to fluctuate widely. Consumers need these prices to be low, in order for the price of finished goods made with these commodities to be affordable; producers need the prices of these commodities to rise ever-higher, to cover the cost of deeper wells and more batteries, to try to partially offset the intermittency of solar and wind electricity.

Most people assume that the situation will be resolved in the direction of commodity prices rising ever higher. In fact, commodity prices did rise higher, until mid 2008. Then, something snapped; commodity prices have been falling ever-lower since mid 2008. In fact, ever-lower commodity prices have been a world-wide problem, causing huge problems for countries trying to support their economies with export revenues based on commodity production.

Figure 2. CRB Commodity Price Index from 1995 to June 2, 2020. Chart prepared by Trading Economics. Composition is 39% energy, 41% agriculture, 7% precious metals and 13% industrial metals.

Even before the lockdowns, low commodity prices were leading to low wages of those working in commodity industries around the world. These low prices also led to low tax revenue, and this low tax revenue led to an inability of governments to afford the services that citizens expect, such as bus service and subsidized prices for certain essential goods/services. For example, South Africa (an exporter of coal and minerals) was experiencing public protests in September 2019, for reasons such as these. Chile is a major exporter of copper and lithium. Low prices of those commodities led to violent protests in 2019 for similar reasons.

Now, in 2020, lockdowns have led to even lower commodity prices. At times, farmers have been plowing their crops under. Oil companies are laying off workers. The trend toward lower commodity prices had been occurring for a long time; the recent drop in prices was “the straw that broke the camel’s back.” If prices stay this low, there is a danger of falling production of commodities that we depend on, including food, metals, electricity, and oil. Businesses producing these items will fail, and governments with falling tax revenue will be unable to support them.

[3] Historical energy consumption data shows that violence often accompanies periods when energy production is not growing fast enough to meet the needs of the growing population.

Figure 3 shows average annual growth in world energy consumption, for 10-year periods:

Figure 3. Average growth in energy consumption for 10 year periods, based on Vaclav Smil estimates from Energy Transitions: History, Requirements and Prospects (Appendix) together with BP Statistical Data for 1965 and subsequent.

Economic growth encompasses both population growth and rising standards of living. Figure 4 below takes the same information used in Figure 3 and divides it into (a) the portion underlying population growth, and (b) the portion of the energy supply growth available for improved standards of living. During most periods, increased population absorbs over half of increased energy consumption.

Figure 4. Figure similar to Figure 3, except that energy devoted to population growth and growth in living standards are separated. A circle is also added showing the recent growth in energy is primarily the result of China’s temporary growth in coal supplies.

There are three dips in the Living Standards portion of Figure 4. The first one came in the 10 years ended 1860, just before the US Civil War. Most of us would say that was a period of violence.

The second one occurred in the 10 years ended 1930. This is the period when the Great Depression began. It came between World War I and World War II. This was another violent period of our history.

The third dip came in the 10-year period ended 2000. This was not a particularly violent period; instead, it reflects the collapse of the central government of the Soviet Union, leaving the member republics to continue on their own. There was a huge loss of demand (really, affordability) on the part of countries that were part of the Soviet Union or depended on the Soviet Union.

Figure 5. Chart showing the fall in Eastern Europe’s materials production, after the collapse of the central government of the Soviet Union in 1991.

[4] The world is facing a situation in which total energy consumption seems likely to drop by 5% per year, or perhaps more.

If we look back at Figure 3, we see that even in very “bad” times economically, energy consumption was rising. In fact, in one 10-year period, the average increase was more than 5% per year.

If the world economy is reaching a point in which we consumers, in the aggregate, cannot afford the goods and services made with commodities, unless commodity prices are very low, we will likely experience a huge drop in energy consumption. I don’t know exactly how much the annual change will be, but energy consumption growth and GDP growth tend to move together. We might guess that GDP growth is shifting to 5% GDP annual shrinkage, and energy consumption will be shrinking by a similar percentage.

Clearly, shrinkage of 5% per year would be far worse than the world economy has experienced in the last 200 years. In fact, for the 10-year periods shown in Figure 3, there has never been a reduction in energy consumption. Even if I am wrong and the shrinkage in energy consumption is “only” 2% per year, this would be far worse than the experience over any 10-year period. In fact, during the Great Recession, world energy consumption only shrank in one year (2009) and then by 1.4%.

History doesn’t give us much guidance regarding what impact a dramatic reduction in energy consumption would have on the economy, except that population reduction would likely be part of the change that takes place. If half or more of energy consumption growth goes toward rising population (Figure 4), then a shrinkage of energy consumption seems likely to reduce world population.

[5] What the world is really facing is a competition regarding which parts of the economy can stay, and which will need to be eliminated, if there is not enough energy to go around. It should not be surprising if this competition often leads to violence.

As I indicated in Section [1], all parts of the economy depend on energy. If there is not enough, some parts must shrink back. The big question is, “Which parts?”

(a) Do governments, and organizations that bind governments together, collapse? If countries are doing poorly, they will not want to contribute to the World Trade Organization, the United Nations or the European Union. Governments, such as the government of Saudi Arabia, could be overthrown, or may simply stop operating. In fact, any government, when it faces insurmountable problems, could simply stop operating and leave its functions to lower levels of government, such as states, provinces, or cities.

(b) Do pension plans stop operating? Are pensioners left “out in the cold”? How about Social Security recipients?

(c) Can international trade be kept operating? It is a big consumer of energy. Also, competition with low-wage countries tends to keep wages in developed nations low. Without international trade, many imported goods (including imported medicines) become unavailable.

(d) Which companies will collapse, leaving bond holders and stockholders with $0? People who formerly had jobs with these companies will also find themselves without jobs.

(e) If the world economy cannot support as many people as before, which ones will be left out? Is it people in rich countries who find themselves without jobs? Is it people who find themselves without imported medicines? Is it the ones who catch COVID-19? Or is it mostly citizens of very poor countries, whose income will fall so low that starvation becomes a concern?

[6] The violent demonstrations represent an effort to try to push the problems related to the shortfall in energy, and the goods and services that energy can provide, away from the protest groups, toward other segments of the economy.

In an ideal world:

(a) Jobs that pay well would be available to all.

(b) Governments would be able to afford to provide a wide range of services to all, including free health care for all and reimbursement for time off from work for being sick. They would also be able to provide adequate pensions for the elderly and low cost public transit.

(c) Police would treat all citizens well. No group would be so poor that a life of crime would seem to be a solution.

As indicated in Section [2], back in 2019, before COVID-19 hit, protests were already starting because of low commodity prices and the indirect impacts of low commodity prices. One reason why governments were so eager to adopt shutdowns is the fact that when people were required to stay inside because of COVID-19, the problem of protests could be stopped.

It should be no surprise, then, that the protests came back, once the lockdowns have ended. There are now more people out of work and more people who are concerned about not having full healthcare costs reimbursed. Social distancing requirements are making it more difficult for businesses to operate profitably, indirectly leading to fewer available jobs.

[7] Violent protests seem to push problems fueled by an inadequate supply of affordable energy toward (a) governments and (b) insurance companies.

In some cases, insurance companies will pay for damages caused by protesters. Eventually, costs could become too great for insurance companies. Most policies have exclusions for “acts of war.” If protests escalate, this exclusion might become applicable.

Governments of all kinds are already being stressed by shutdowns because when citizens are not working, there is less tax revenue. If, in addition, governments have been paying COVID-19 related costs, this creates an even bigger budget mismatch. Governments find themselves less and less able to pay their everyday expenses, such as hiring teachers, policemen, and firemen. All of these issues tend to push city governments toward bankruptcy and more layoffs.

[8] Dark skinned people living in America tend to be Vitamin D deficient, making them more prone to getting severe cases of COVID-19. Vitamin supplements may be an inexpensive way of reducing the severity of the COVID-19 epidemic and thus lessening its diversion of energy resources.

There are a number of reports out that suggest that having adequate Vitamin D from sunlight strengthens the immune system and helps reduce the mortality of COVID-19. Adequate Vitamin C is also helpful for the immune system for people in general, not just those with dark skin.

Dark skinned people are adapted to living near the equator. If they live in the United States or Europe, their bodies make less Vitamin D from the slanted rays available in those parts of the world than they would living near the equator. As a result, studies show that Vitamin D deficiency is more common in African Americans than other Americans.

Recent data shows that the COVID-19 mortality rate for black Americans is 2.4 times that of white Americans. COVID-19 hospitalization rates are no doubt higher as well. Encouraging Americans with dark skin to take Vitamin D supplements would seem to be at least a partial solution to the problem of greater disease severity for Blacks. Vitamin C supplements, or more fresh fruit, might be helpful for all people, not just those with low Vitamin D levels.

If the COVID-19 impact can be lessened in a very inexpensive way, this would seem to be helpful for the economy in general. High-cost solutions simply divert available resources toward fighting COVID-19, making the overall resource shortfall for the rest of the economy worse.

[9] Much more equal wages would seem to be a solution for wage disparity, but this doesn’t bring the wages of low earning workers up enough, in practice. 

There are a huge number of low-earning workers in many countries around the world. In order to increase commodity prices enough to make them profitable for producers, we really need wages in all countries to be much higher. For example, wages in Africa and in India need to be much higher, so that people in these parts of the world can afford goods such as cars, air conditioning and vacation travel. There is no way this can be done. Furthermore, such a change would add pollution and climate change issues.

There is a fundamental “not enough to go around” problem that we do not have an answer for. Historically, when there hasn’t been enough to go around, the attempted solution was fighting wars over what was available. In a way, the violence seen in cities around the globe is a new version of this violence. Governments of various kinds may ultimately be casualties of these uprisings. Remaining lower-level governments will be left with the problem of starting over again, issuing new currency and trying to make new alliances. In total, the new economy will be very different; it will probably bear little resemblance to today’s world economy.



This entry was posted in Financial Implications and tagged , , , , by Gail Tverberg. Bookmark the permalink.

About Gail Tverberg

My name is Gail Tverberg. I am an actuary interested in finite world issues - oil depletion, natural gas depletion, water shortages, and climate change. Oil limits look very different from what most expect, with high prices leading to recession, and low prices leading to financial problems for oil producers and for oil exporting countries. We are really dealing with a physics problem that affects many parts of the economy at once, including wages and the financial system. I try to look at the overall problem.

2,617 thoughts on “Increased Violence Reflects an Energy Problem

  1. Heard through the grape vine that a popular Victorian hotel in Pitlochry, a touristy town in central Scotland, has shut down permanently. Turns out 6-7 hotels in Scotland owned by the company are shutting down. I think they are all fairly big. Plus several holiday companies owned by The Specialist Leisure Group with the loss of 2,500 jobs across the UK.

    Blow for Pitlochry as hotel in large Victorian building closes for good due to coronavirus (23 May)

    “The Pitlochry Hydro is one of six hotels in Scotland that will not reopen post-lockdown after its owner, the Specialist Leisure Group, fell into administration.
    Other casualties in the Highlands include the Caledonian Hotel in Fort William, the Bay Great Western Hotel in Oban and the Bay Highland Hotel in Strathpeffer.
    Across the UK, some 2,500 people will be made redundant as a result of the demise of the Wigan-based firm.
    A statement from the Specialist Leisure Group said: “All tours, cruises, holidays and hotel breaks booked with the Specialist Leisure Group have been cancelled and will not be rescheduled…”

    Same theme from the BBC:
    Seven tourist hotels across Scotland cease trading

      • What keeps most of the bigger tourist hotels, here anyway, open is the coach tours full of elderly / retired folk. Two of the companies that went under, National Holidays and Shearings, were two of the largest coach companies in the UK. I cannot see any future for coach tours going forward.

        • I suspect it keeps the National Trust and many historic sites going as well – always full of pensioners who come in coaches as well as by car.

          A tragedy is unfolding.

  2. The world is getting smaller…

    Jeff Rubin sounded the alarms back in 2008/09…with his book “Why your World is About to Get a Whole Lot Smaller”. One of my first reads on Peak Oil back then..😳
    Well, it hasn’t worked out the way he envisioned at all, but seeing the tourist trade collapse as it has, people may not be moving around like they were.
    Here in South Florida, as I drive down 1-95, passing Highrise Hotels around the Airport, the parking lots are virtual empty, as well as, the parking garages at the Airport.
    If it does bounce back, it will be interesting to see the price of Oil and if there is a Spike😂😜👍🤣

    • Just to put that development in better context, the original viral strain of corona virus from Wuhan later mutated into a strain that had more spikes to better attach to human cells, and that’s the strain that swept through the West, Europe, US, etc. The good people of Wuhan have not been exposed to the mutated strain before and the above article describes their findings, i.e. their antibodies against the original strain do NOTHING against the mutated D614G strain.

      • “The most recent offender is a preprint claiming that SARS-CoV-2 with an amino acid change in the spike glycoprotein (D614G) increases the transmissibility of the virus. The claim that this amino acid change increases viral transmission is unsubstantiated and likely incorrect. There is no doubt that viruses with the D614G change are emerging in different geographical regions of the world. Until proven otherwise, their emergence is likely due to the founder effect. Let’s say a virus with D614G emerges during replication in a person’s respiratory tract. If viruses with that change infect the next person, and the next, and so on, then the D614G change will predominate. The change is simply a single nucleotide polymorphism of little consequence. It is the noise produced by error-prone RNA synthesis by the virus. Viruses with D614S are simply virus isolates. They are not strains of SARS-CoV-2.”

    • This story keeps going from bad to worse. It looks less and less like a vaccine can be found that actually works. And the D614G mutation is more and more of a problem?

      Does anyone have a link to the academic study that this article is based on?

      Also, are there any published studies on where geographically the D614G mutation is being found? For example, is the low death rate and low infection rate in Japan and some other Asian nations mostly because they managed to avoid the D614G mutation, so far?

    • I doubt there will ever be a “cure” for corona, except for living in a healthy manner and avoiding pollutants. But researchers help keep up demand for goods I guess…

      • You have to wonder how we managed to increase our numbers from 10,000 to almost 10,000 million over the last 70,000 years. As a species we have been infected with many viruses and bacteria, and yet we survived every one, no antibiotics or vaccines whatsoever (until about a century ago), and our numbers kept growing.

  3. Since any one is free to make a model even if they turn out to be off by three orders of magnitude.
    My back of the envelope model is 1/1000 who can get the CV19 will die. Only half the population can get CV19 due to life long exposures to numerous CVs. So we can tell how close a nation is to being done. For the US 330 million, 165 million infect-able, deaths at end of course 165,000. Current deaths 120,000. Remaining expected deaths in US 45,000.

    Let’s look at Italy 60 million people, 30 million infect-able, deaths at end of course 30,000. Current deaths 35,000. Looking at the histogram Italy is near the end. This is a simple approximate model folks.
    Spain, 47 million, 23.5 million infect-able, deaths at end of course 23,500. Current deaths 28,300 again Spain’s histogram shows they are near done.

    The elephant in the room is China. 1392 million, 696 infect-able, deaths at end of course 696,000. Current deaths 84,600. China still has 611,400 deaths to go.

    Let’s finish off with NZ. 4.8 million 2.4million infect-able, deaths at end of course 2,400. Current deaths 22, death remaining 2378. Or just never open the border or hope for vaccine.

    Yes, it may be the virus keeps mutating and keeps winnowing down the human population. Just have to wait and see.

    • It is either a vaccine or herd immunity.
      And herd immunity may only last a couple of months.
      Both are quite far away.

    • I’m afraid it’s doing a very poor job so far in reducing human numbers. World population growth is still over 200,000 per day! That’s like adding another Germany every year.

      • yes, the seeeecret plan to reduce population is just not working.

        maybe “they” can tweak their plan a little bit.

        • >>the seeeecret plan to reduce population is just not working.

          I think it is a bit premature to be sure of that. With the world’s economy in tatters, huge numbers of people out of a job, huge debts that cannot possibly be paid off and growing, and various issues relating to food supplies, not to mention the coming deluge of bankruptcies, I’d speculate the plan is working nicely. Famines are on the way, and with those probably pestilence, the two usually occur together. Patience.

          If you have not watched “Global Health Mafia Protection Racket”, I recommend it.

    • E, thanks for those thoughts.

      science is saying 1 in 200 die, or 0.5%, so this is 5 times your figure, which I have never seen proposed as scientific.

      so USA deaths at end of course would be 5 x 165,000 = 825,000.

      a long way to go.

      perhaps treatment will improve and reduce the current rate of 0.5%, but a 33% improvement would still be 500,000+. or the virus mutates and reinfects vicktims and the totals go higher than 1,000,000.

      a long way to go.

      but anyway, your idea is a good one to keep in mind as the totals head for 200,000 300,000 etc.

      • the initial death rate will go up as supply lines break down. without that heart medication covid may be more deadly. the collapse of the economy will bring on starvation. those numbers have not been factored in.

        • also if the virus becomes endemic and immunity fades after 2 or 3 years,
          those odds shoot up.

  4. BAU BABY rolls on in the future plans in the corporate boardroom….
    American Airlines Expects To Spend $8.4 Billion On New Planes
    byMark FinlayJune 22, 2020
    American Airlines has said that its estimated expenditures for aircraft purchase commitments between 2020 and 2024 would be around $8.4 billion. Regarding how it was going to raise the money, American Airlines says it expects to obtain a binding commitment for a loan under the CARES Act.
    American is also hoping to raise $1.5 billion by selling shares and convertible notes as it continues to battle travel restrictions brought on by the coronavirus. In a statement, the airline said that it expects to use a part of the cash raised from the offering for corporate purposes and to enhance its
    In some long-awaited good news, both American Airlines and Delta have said that they have seen a slight uptick in demand for air travel. While still nowhere near the level we were at before the coronavirus pandemic, the modest recovery is managing to slow down the daily cash burn.
    While now would seem like a wrong time to be spending billions of dollars on new aircraft, American Airlines must look at the overall picture. Commitments were made to Boeing and Airbus long before anyone had heard about COVID-19. Some of them can be delayed, but American Airlines still needs new aircraft to replace planes scheduled for retiremen
    Of the big three United States carriers, American Airlines is leading the way with its fleet renewal and has 53 planes due to be delivered this year.
    American Airlines is thinking long term
    While American Airlines plans to spend $8.4 billion on new planes, other airlines will look at the coronavirus as a way to trim staff and expenses. American though appears to be taking a long-term approach by repacing older planes with new more fuel-efficient jets.

    • “… American Airlines still needs new aircraft to replace planes scheduled for retirement.
      Of the big three United States carriers, American Airlines is leading the way with its fleet renewal and has 53 planes due to be delivered this year.”

      the industry obviously needs less planes, and I bet staying with the same retirement schedule for their planes would still leave them with too many planes.

      or one of the other “big three” could go under, in which case AA would have a bigger slice of a smaller pie.

      but then AA would be in a position to buy the newer planes of the bankrupt company.

      “American Airlines is thinking long term.”

      well, they think they are thinking long term…

      but they are not systems-thinking long term.

        • Seems like the story of 737 Max is a good reflection of the economy in general. Broken.

    • I continue to be amazed by the inertia in our system. The weight of the can is starting to become onerous though . . .

  5. From Zerohedge: NYC’s Army Of 3,000 COVID-19 ‘Contact Tracers’ Have Accomplished Surprisingly Little

    Interestingly, the biggest ‘obstacle’ to obtaining this information is the patients themselves: Only 35% of the 5,347 city residents who tested positive or were presumed positive for COVID-19 in the program’s first two weeks gave information about close contacts to tracers, the city said.

    A New York Times quote in the Zerohedge article:

    Dr. Halkitis at Rutgers said he thought the low cooperation rate was likely due to several factors, including the inexperience of the tracers; widespread reluctance among Americans to share personal information with the government; and Mayor de Blasio’s decision to shift the program away from the city’s Department of Health.

    “You have taken it away from the people who actually know how to do it,” he said. “The D.O.H. people, they are skilled. They know this stuff.”

    • I think the article meant to say “unsurprisingly little”. First, rely on technology devised by companies that have a long track record of invading customer privacy. Secondly, create a new organisation staffed by career bureaucrats who couldn’t trace a fox given a dozen hounds to help. Thirdly, ensure that there are the right numbers of “minorities”, hired as usual for their chromosomes not their competencies. Finally, claim it is a “success” when people simply answer their phones, even if they give no useful information.

      In sum: “We are addressing the problem but will do all the wrong things, as usual.”

    Coronavirus has downgraded from ‘tiger to wild cat’ and could die out without vaccine
    Infectious diseases specialist Prof Matteo Bassetti says Covid-19 has been losing its virulence.
    But CV will kill tens of millions! Shut down the world economy! Even one life is too many! Don’t be a denier!

    Just shaking my head.


    “A shooting Sunday night was the second in less than 48 hours at the edge of the zone, which is named for the Capitol Hill neighborhood near downtown Seattle…”

    CHOP… Commmie Helll On Parade.

    “The mayor did not give an immediate timeline for clearing out the occupation but said “additional steps” would be examined if people don’t leave voluntarily. With scores of people camping in a park in the protest zone, Durkan said peaceful demonstrations could continue, but nighttime disorder had to stop.”
    “At night, however, the atmosphere has become more charged, with demonstrators marching and armed volunteer guards keeping watch.”
    “With not having a police presence here, people are free to do whatever they want to do,” said Bobby Stills, a Seattle resident…

    so it seems that “people are free” to shoot each other…

    • It sounds like the woman sort of still sort of had the virus, but received two false negative test results, before testing positive again.

Comments are closed.