This chart demonstrates one characteristic of a changing energy return on investment (EROI). This is the ratio between how much energy is takes you to produce or acquire an energy source (such as oil, natural gas, biofuel, or hydrogen) and the amount of energy contained within it. This graph relates to a hypothetical oil field that is consistently able to produce 100,000 barrels per day of oil. On the left hand side, the EROI is 100:1. This means that you get 100 units of usable energy for every 1 unit you invest in extraction. This ratio is comparable to some of the best oilfields in Kuwait, where you just need to drill a hole and oil will gush out. On the right, the EROI falls towards 1:1. More and more of the barrels of output (or an equivalent energy source) must be used to extract the oil. By the end, there is no net energy production.
There are a few reasons for which this is important:
- It shows that even when the gross output of an oil field is stable, its value can fall off precipitously as the energy cost of extraction rises. This happens as you need to use more and more novel technologies and more and more capital to access the oil.
- EROI has a huge impact on the viability of alternative energy sources. If the ratio for biofuels is only 5:1 or 2:1, that means that enormously more energy must be devoted to producing the same quantity of fuel as was once available in Kuwait at 100:1.
- The combination of oil field depletion and worsening EROI can cause a faster dropoff in production than either factor taken in isolation.
One caveat should be mentioned in closing. There are situations in which an EROI of less than 1:1 is acceptable. Specifically, this is when the final product must have valuable special characteristics. This is true of exotic fuels like, say, sirloin steaks. Each one contains far fewer calories than it took to produce, but that is still economically acceptable due to the premium attached to the calories in the final product. While EROI ratios below 1:1 are acceptable in niche areas, they can never be the energy basis of an entire economy.