Complacency Syndrome

An unprecedented energy crisis that could lead to much worse is being shrugged off as we muddle along.

Covid started as a rumour, something odd happening in a town in China that no one had ever heard of. Short clips on social media showing masked officials, empty streets, apartment doors sealed shut. It felt distant and very unreal.

Then it spread - a cluster in Italy. Hospitals under pressure. Northern towns closing down. It was discussed, but alongside everything else. Football results, politics, the usual background noise of daily life. There was a sense that it was serious for them, but not necessarily for us.

COVID did not arrive all at once. Airports stayed open. Flights continued. Offices were full. Plans were made. It crept in through fragments of information, then burst on us with lockdowns and all bizzare rules, guidelines and regulations.

In those early days there was a growing awareness - somewhere in the background. A quiet thought that this might travel, that it might not stop where it was. But it remained abstract. Each new headline was absorbed, then set aside.

With hindsight this seems odd - and whatever one’s views on the severity/not of COVID and on the reasonablness/not of the responses - in the early days it could have been an existential pandemic and yet the initial reaction was kind of a shrug.

One factor that might explain this is the Normalcy Bias - a core instinct is simple: things will continue roughly as they have before. We are not conditioned to see massive changes - Black Swan events - the Unknown Unknowns..

In addition we are pretty good at the Ostrich trick of “head in the sand”. This refers to the tendency to avoid negative information when it becomes too uncomfortable or threatening. Wilful Blindness, selective attention, availability heuristic; people simply stop looking too closely. Too hard to get one’s head around.

We also tend to think in terms of linear change and not discontinuities or exponential threats. These are just not common place - so again, normalcy bias.

When lockdowns and all came home, it was so different that the word “unprecedented” became the most incorrectly¹ over-used word ever.

That Was Then, This Is Now

The energy situation is now earning the moniker of “unprecedented”.

Contagion

Is this hyperbole, or a warning that our understanding of the world is about to crumble?

A disruption in a shipping lane may not seem so bad. A delay here, a price move there. Reports of LPG shortages in India, panic buying in Thailand, restrictions on refined product exports, and now both Australia and New Zealand - sitting uncomfortably at the end of a long supply chain start worrying about Days of Cover for their diesel and petrol stocks. Seems a bit like the early days of COVID?

Better informed commentators have noted that this is not just oil and products, but is directly impacting global supply of fertilizer, LNG, sulphur and so on. The “second and third order effects are lining up.

A major escalation this week has seen the direct targeting of oil and gas production facilities - notably the strike on South Pars and retaliation on Qatar’s LNG (its the same giant field that sits across the gulf).

Normal, Until It Isn’t.

Watching the world with energy security glasses on is scary as hell at the moment - and I am known for being a catastrophist - so big pinches of salt all round. But..

But…

But planning birthday parties, following sports events (Go Habs!), thinking about summer vacation and indeed business investments all seem slighly unreal at the moment. It is as if a monster has been awoken: we can hear it howling but can’t see it yet, so life goes on as rumours of outlying villages being razed filter in.

In our village the markets are clearly not yet spooked. Oil at $105/bbl seems ludicrously low given the disruption to supply. Significant backwardation indicates lower prices a couple of months out - which seems unlikely, but hey “wisdom of the crowds” and all that. Maybe someone knows something - a miraculous spell to put the monster back to bed?

The aspects that worry me the most are those second, third and forth order effects - classic non-linear disruption. Rationing of energy, lack of fertilizer, massive inflation - especially in food - which always leads to social unrest. Last time this happened it was closely linked to the “Arab Spring”, conflict and mass migration. These are the ones we can “see”. What of the unknowns? Whilst a repeat is possible with pain focused on poorer countries, it is also worth considering the fact that most “OECD” countries are not as rich as they think they are - vast piles of debt will become more than just balance sheet liabilities.

It may be a coincidence, but as the early stages of this energy crisis unfold - the UK’s cost of borrowing has hit an 18 year high. Bad as this is, it is compounded by the fact that the absolute amount of borrowing is massively greater than in 2008.

Back then UK debt was ~£0.7 trillion or roughly £700–750 billion, which was about 40–45% of GDP. Today (2025–2026) it is ~£2.6–2.7 trillion which is 95-100% of GDP.

An energy crisis will quickly morph into a debt crisis.

Signals and Noise

COVID thankfully was not the pandemic to end all pandemics, but it potentially holds a lesson for us in how we should view the signal in all the noise.

The defining feature of complacency is that it coexists with awareness. We can hear the noise, see the early signs, and still carry on. Indeed, it is human to “just carry on”. The system is still working, so it feels safe to assume it will continue to muddle through as it always has.

Normalcy Bias tells us that muddling through is the most likely outcome, but recognizing a discontinuity when things are already broken is going to be kind-of “too late”. The key is recognizing the point at which they are no longer as stable as they appear, or as stable as we are used to - and I suspect that is now.

Good Luck out there!

1. Spanish Flu in about 1920, the Black Death (OK - so Normalcy Bias might excuse not recalling that one) etc.