PEAK OIL

#7 What Is the Significance of EROI for the Price of Oil?216
To generate energy, energy is needed. EROI – Energy Return on Investment – specifies
the relation between the energy generated and the energy that is used directly and
indirectly for energy production. Net energy is the energy that remains after the energy
production costs have been deducted. Energy production costs not only include the energy
input necessary for recovering oil (direct) but also the input needed to find new sources or
for the transport of energy (indirect).
The EROI is decreasing, because oil is increasingly found in reservoirs that are difficult to
access, coal with lower energy content is used, and longer oil pipelines have to be built
through difficult terrain. It is difficult to accurately calculate the EROI, but there are
estimates that the EROI of American oil fell from 100:1 in the 1930s to 30:1 in the 1970s
and eventually to between 11:1 and 18:1 today, and that the EROI of global oil and natural
gas production lies at 18:1. These are average values. The value of new production
facilities, however, is even lower. Oil shale, for example, has an EROI of 1.5:1 to 4:1.
With conventional oil decreasing in quantity, unconventional oils from biofuels, tar sands,
etc. are used (no mutual dependences assumed). 100 joules of conventional oil with an
EROI of 11:1 cost 9 joules to manufacture and provide 91 joules of usable energy. If this oil
were replaced with bioethanol, 25 joules would be needed for production with an EROI of
4:1, which only yields 75 joules. The result is an even more rapid decrease in usable energy
and, thus, an increase in energy costs.
Figure 13: EROI Estimation for Energy Sources
Source: cf. Heinberg, R. 217
216 Cf. David Korowicz, Tipping Point. Near-Term Systemic Implications of a Peak in Global Oil Production. An Outline Review, The Foundation for the Economics
of Sustainability (March 2010), 13 ff., http://www.feasta.org/documents/risk_resilience/Tipping_Point.pdf (accessed on 13 October 2010).
107