Nate that was just about the best comment I have read.
Well said and succinct.
Your knowledge on the subject is probably second to none.

I try to break EROEI down to the basic human level because that is easiest for me to come to grips with. IE What energy is a person required to expend to provide the basics of food, clothing, shelter and security, for him/herself and children.

Surplus energy then provides better quality basics and an ability to indulge in entertainment which of course includes self actualizing and the arts.

IMO our insatiable need for pleasure is the root cause of our energy waste.
Paying someone to mow the lawn, iron our clothes, clean the windows, wash the car, cook our meals and entertain us is the direct result of having energy to waste.

We see the waste in gigantic theme parks, pleasure ships and sporting venues to just name some.
As the energy return on investment declines we will see expenditure on entertainment and fine "things" decline. We will see a gradual return to ensuring our needs for the basics are met.

Things are still relative though. If we were to ask an average Zimbabwean or New Yorker to name their basic needs and calculate the energy needed to provide them, the difference would probably be obscene.

Our "leisure" time is going to decrease substantially as the economy contracts and as I have iterated previously, our biggest asset will be our ability to work hard and long and not be selective. The competition for jobs and work will increase monthly, along with a reevaluation of our expectations of what "quality" and entertainment actually means.

Nate:

I am trying to understand here. If EROI for some New Oil is approaching energy break-even then how can you make money on its extraction other than with rising prices.

6) EROI has political elements. One example: in strip mining, how do you categorize tasks such as putting overburden back into the hole, compacting dirt, landscaping etc.? The energy inputs needed for such processes are not a physical requirement of mining the coal and harvesting its energy. They're a political requirement. They aren't strictly *necessary*, except within the context of certain political arrangements.
This is just one example of a broad phenomenon. It comes into high relief when you look at EROEI from a perspective of strict necessity. All kinds of interesting questions arise. Do the office staff of a drilling company actually *need* to drive to the office to produce the oil? Is the energy spent filing tax returns actually necessary to produce the oil? etc. etc. You really need to get a handle on the concept of "necessary". Otherwise, you're doing poli sci., not physics.

"EROI of NEW oil (which in aggregate I would estimate is approaching energy break even - same goes for North American natural gas)"

This strikes me as a rather crucial comment. On what is your estimate based?

We in the PO community often point out that peak oil does not mean the oil is gone, but this statement would imply that net energy from new oil (or even from NG in No. Am.) is in fact gone.

I wonder on the terminology side of things if we should use "net energy" as an overarching term that could include issues of energy extraction as well as energy saved through insulation and other improved use? Then we could save EROI/EROEI (I prefer the latter in spite of its clumsiness) purely for production.

I do think it is important to be able to be clear when one is strictly talking about production. But it is even more important that we start trying to be clear about various means of energy conservation, starting with the most essential areas like insulation of houses (especially essential where I live in the frigid north).

Great idea to have a section devoted to these critical issues.

Yes, there are accounting problems in measuring EROEI. Even accounting as it is used today in business and finance is imprecise, but we still rely heavily upon it to see how well we did and to make decisions about the future. Problems in quantifying an underlying concept do not mean that we should abandon the concept, and certainly the concept exist as a law of nature whether we ignore it or do the best we can to make measurements.

Of course EROEI is useful in choosing where we should use precious resources that we currently posses; it just makes sense to look for a higher return, all things considered.

Equally useful is measuring the change in EROEI over time. The observed deterioration of EROEI for oil production is certainly useful information in estimating the future. Indeed, the deterioration of EROEI seems to be a fundamental principle of resource exploitation, a fact that we should well note.

The following is the response by Charlie Hall to Nate's first comment under this post.

Nate

Although I take issue with some of your criticisms because there is nothing in what we have said about EROI that precludes the issues you raise, I think it very good to have open criticism and discussion of any science.

I have no argument that EROI is a blunt instrument, at least until we get far better data and probably after that too since there are many e.g. social or environmental issues that should not be merged into ANY analysis, EROI, economic or whatever. We have said this for at least 40 years. But the differences among the choices are often so large that you can derive broad conclusions from straight forward EROI analyses anyway. One of our main and most consistent requests is to get better data routinely.

1) Why is double counting any more or less a problem with EROI as anything else? We have never advocated analyses that double count, and to our knowledge (with the exception of certain issues such as whether to include labor, where we discuss it explicitly) I believe that we do not do that ever. If someone else does that it is not the fault of EROI, but the investigator.

2) Our papers on EROI have indicated that it is for energy only, but that there are ways that you might include other resources less directly connected to energy via e.g. emergy analysis, which we have stated we like but have difficulty with some details. Certainly EROI analysis does not preclude listing other issues not in energy terms, as is obvious from our TOD posts last spring. If you get the same results with e.g. EROI and soil erosion analyses, as with corn-based ethanol, then there is no conflict. If the answers contradict one another then you have a problem that might be best left to the political process, as with any other analysis.

3) I think you make a good case for doing EROI for both average and marginal conditions! This, as some respondees indicate, has nothing to do with whether EROI is good or bad and in fact enhances its utility.

4) We most certainly deal explicitly with quality in essentially all of our publications on EROI. In fact we have emphasized it, as in the title of our 1986 book: Energy and resource quality: the ecology of the economic process".

5) Our best summary of EROI (in our opinion), the balloon graph , EXPLICITLY deals with scale.
THat is what the y axis is about and is half the reason for the graph.
Hence I do not believe that ANY of these is an exception although, as stated I always welcome criticism and the back and forth dialogue as we refine our science.

Finally a note on the many comments:

I still like the term EROI for reasons given on TOD earlier, but the reader is welcome to use what he or she wishes as long as it is defined explicitly in the first paragraph. Perhaps we could reach a concensus by all of us saying "The kind of net energy analysis that we prefer is EROI (or EROEI or ERoEI) which is defined as give formula, followed by boundaries or whatever".

Charlie