But Rockman this is the crux of the problem with EROEI obviously a large number of resources remain potentially profitable at some price point. Some like methane hydrates need technical development before this price point is discovered. But thats the intrinsic problem with just using price to determine resource viability. Its simply not sufficient. Aggregate increasing energy prices now are a net negative on the economy overall at some price point we will force a significant number of Americans to adopt a different lifestyle. It may not be direct and in fact most of its secondary i.e a factory becomes uncompetitive at a a certain NG price point can afford the capitol costs and shuts down.

Now demand for NG from this factory declines but far more important is that the shutting of the factory takes out a broad spectrum of demand for a wide range of products and of course causes a cascade of debt defaults.

The next case is the critical one and it works in had with the first case. Remaining industries of all types now face both rising energy costs and excess capacity. Rising energy costs impact short term cash flow and excess capacity does also as prices must be lowered. This means that these business and they are generic across the economic spectrum are going to try and borrow as much money as they can. Credit lines will be drawn down and suicide contracts signed in and effort to stay in business. Rising defaults will put pressure on real interest rates causing them to rise. So you see a major debt crunch coming as lenders that do lend at government rates are forced further into insolvency and those that attempt to lend at rates matching the default level simply cause even more strain on the capitol markets.

Finally the energy industry itself is operating in the exact same capitol markets and competing with its customers for capitol to fund expansion of energy project that may eventually cause energy prices to drop. In general one can expect the energy industries to hoard cash and slow expansion as they themselves face both rising costs for money and uncertain demand levels. Also of course this situation sparks a internal merger and acquisition flurry which overall impairs the ability of the industry to develop new resources leading to even higher prices and more demand for mergers. Overall I suspect far more capitol will flow into mergers than into expanding production. This merger activity further impairs the capitol markets and is not in this situation a good thing. And once the mania starts the tendency is for capitol to be sucked into the quick returns provided by mergers vs extensive investment in expansion.

Now on the customer side you have a similar situation starting to occur as more and more business get into deep financial trouble the solution will often be a merger or purchase of a defunct companies assets for pennies on the dollar. We will see merger mania spreading across a wide range of industries. Generally this results in downsizing the workforce after the merger driving the demand drop across the economy. In general these mergers actually increase the debt load making the new entities even less viable to rising energy costs leading to more borrowing and eventual default.

Thus in a declining EROEI our capitol markets act in reverse destroying the people trying to save themselves. The intrinsic problem is that no one can repay their debts. The concentration of capitol in the energy industry does nothing to help since the economic effects are broad and caused by the combination of rising energy prices and excess capacity.
The energy industry can produce all the expensive resources it wishes but this does nothing but increase the excess capacity problem and erode the balance sheets of its own customers.
If this sounds like a vampire then your on the right track.

And of course underlying all of this will be the fact that debt can be offered to infinity at some price the continued injection of debt at ever higher costs is the real problem.

This is how I think the real underlying fact that EROEI is no longer sufficient to sustain our current economic system plays out. The coupling is through rising energy costs, debt and ever increasing overcapacity despite company failures. No one is a winner in this game and I'd argue the accumulation of capitol in the energy sector is just a small part of the overall amount of money moving. The debt taken on to offset capitol accumulation in the energy industry is far larger than the amount of money flowing into the energy industry. In fact most of the money going into the higher prices is going into production costs by definition. Its literally being burned up.

Although Japan is not the world and a global energy decline provides no outlet its instructive to look at Japan in this context since they import all of their energy. They where unable to escape persistent deflation despite a range of financial tricks for decades.
The only reason Japan has survived until now is via exports. Well the entire world can run a export economy so its not a viable solution further borrowing does no good and in fact it acts to hasten the decline rate.

In closing I think you will find given the above that we will experience ever increasing energy prices in the long term from now on out. As the cash flows into the energy industry I contend that mergers will take the lion share of the money and that the amount devoted to expansion will remain insufficient to offset the increasing costs. The energy industry will in effect fiddle while Rome fails to burn :)

And last but not least underlying all of this is the fact that our economy is really a group of ponzi schemes once real growth stops a facade of growth via merging of ponzi schemes to create new pyramids that can go slightly higher before they themselves collapse will serve to hide our real situation. The biggest ponzi schemes will of course be bailed out at taxpayer expense further delaying the day of reckoning for a bit longer but its all a facade there is nothing real under the covers. No one is making any real long term gains not even the energy industry.

And last but not least this does not mean that capitol and assets won't accumulate and concentrate I've argued that the other big winner will be our banking system which will cease fractional reserve lending and lend money on assets that sell after getting them for nothing via a big laundering scam with the US government. Indeed one can expect wealth to become heavily concentrated and its not clear that the energy industry itself will be able to resist taking on extreme leverage to fund mergers eventually resulting in more and more assets taken over by banks. As energy will probably be one of the key components of an asset backed currency I expect as what I've outlined plays out that eventually the energy industry itself will be forced into bankruptcy and bank take over.

The fact that the energy industries customers cannot intrinsically afford their products seems to indicate that at some point financial leverage will grow to the point that the banking industry can take over. Under the covers they do this by lending to both parties and simply waiting for defaults at some point once enough debt has been injected even the energy industry will falter.

And last but not least the banking industry simply does not care since once its seized enough assets it can simply issue a new asset backed currency with limited or no fractional reserve lending and viola they survive and in fact given they would then seriously withdraw credit at that point they massively increase their asset base as credit is exponentially harder to obtain in the new currency and debts transferred from the old one default.