This is the first of a series of articles that I plan to write on Energy Return on Energy Invested (“EROEI”). EROEI is effectively the ratio of energy gained from a process, to the amount of energy expended to produce that energy. It is complex to calculate and poorly understood.

For 9,800 of the last 10,000 years, since the dawn of the agricultural era, humans have relied on wood, in addition to food, for energy.  For every unit of energy put into using wood, we get 4 units of energy in return.  Since all of life (and by extension, an economy) is energy conversion, an energy return of 4:1 results in a natural limit on expansion.

The discovery and use of fossil fuels over the last 200 years has changed all that. We have used fossil fuels at a remarkably high rate, with historic returns on energy as high as 150:1, but much lower today. Coal, oil and gas were formed from vegetation about 400 million years ago. These energy sources are becoming increasingly expensive to produce, they are finite and will not be replenished.

Renewable energy, such as corn ethanol, often consumes more energy that it produces, thus the absurdity of government subsidy. And there is nowhere near enough uranium to fuel the world at current levels of energy consumption. World energy consumption in 2010 was 510 quadrillion Btu, an incomprehensibly large amount. A Btu (British Thermal Unit) is the amount of energy required to heat (or cool) one pound of water by one degree Fahrenheit. A litre of petrol is equivalent to around 25-30,000 Btu’s.

There are some technologies, such as solar breeders, that do offer promise, but it is hard to imagine being able to build on the scale required to replace fossil fuels. Nuclear fusion remains a dream after decades of work.

Unfortunately we have people today, especially the political hacks acting as leaders, who believe growth can be infinite and life will get always bigger, brighter and better. It won’t. You cannot have infinite growth with a finite resource. And much of the current strife in the world today has its origin in the search for energy security.

Mankind has had a period of unsustainable prosperity. Without large new sources of cheap energy our future could look very much like our distant past.


Maintaining energy production is becoming ever more expensive. In the future, the investment required for energy production is likely to squeeze out investment in more “discretionary” parts of the economy. This trend has already started and yet politicians and economists are silent on the subject. It is the energy equation that allows economic growth, not monetary or fiscal policy.

In subsequent articles I shall provide more specific information to facilitate investment decisions. For example, how will a declining EROEI affect food production and prices?