The Oil Drum

99 comments on Peak Oil and The Energy Utilization Chain (EUC)

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Nate Hagens on December 22, 2006 - 2:40pm

Wolf-

This is the crux of the issue. In theory you are corect. However in reality, using dollars to generate decisions gives you a constant moving target, based on the markets sloth at recognizing scarcity. Your decisions would change monthly in an energy crisis. Net energy analysis attempts to jump ahead of this by acknowledging that energy is important (implicitly, energy is more central to our needs, whereas the market is good at pricing our wants), and pricing things in energy terms so that accurate planning can be made in advance. I suspect that as we begin to run faster on our natural gas treadmill, the value of pricing ethanol in energy terms instead of $ will become apparent.

In a perfectly functioning market that has no subsidies, that values externalities, and that doesnt exhibit very steep discount rates (valuing the present more than it should), pricing in dollars would equal pricing in energy, but we are a long way from that.

sorry I missed you in Portland...(next summer!)

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JoulesBurn on December 22, 2006 - 4:00pm

Nate,

When calculating EROI in this way, any bias in the dollar value of energy divides out. One might have to take an average over a period of time to account for variations in market forces of different energy types, but this is easy to do. Similarly, all energy produced with fossil fuels is discounted similarly and this bias exists both in the numerator and the denominator in an EROI calculation.

Using a more rigorous approach (following energy expenditures all the way up the chain), you still cannot account for externalities (nuclear waste buried for centuries, global warming effects, missing mountaintops in WV, quite a mess in Alberta, etc. etc.). What is the energy value of those? What is the energy cost to society of disrupting the food supply?

Also, improvements in technology improve EROI--it is not a static number. Pimentel has been often criticised (and then his arguments dismissed) for using supposedly obsolete numbers.