The EROI is the ratio of the energy produced to the energy spent to make a certain energy production system work. It is something deeply embedded in the concept of "biophysical economics." It derives from the idea that the human economy works in the same way as an ecosystem. Not just because they have the same term "eco" (from the Greek oikos) in the name, but because they are both "dissipation structures," in the sense described by Prigogine long ago. A dissipation structure turns energy into waste or, if you prefer, does its job of increasing the entropy of the universe. (see some references at the bottom of this post).
So, the EROI is analogous to the economic return on investments. In mathematical terms, it is the same as the "effective reproduction rate" in biology, and also to the "reproduction number" (Rt) that was so fashionable during the pandemic, when people struggled to "flatten the curve." In EROI terms, they were striving to reduce the EROI of virus replication. The opposite of what we are trying to do with energy sources!
Unfortunately, as they say, "the devil is in the details," and the discussion on EROI is affected by misunderstandings and by the unavoidable uncertainty involved in evaluating complicated systems such as the oil industry. The paper by Murphy et al. that Berman discusses is aimed at clarifying a fundamental problem: "energy" is a well-defined physical quantity, but we are not interested in energy as such, but in energy potentials. A concept that defines how much useful work can be obtained from energy. The energy potential is a mix of the two fundamental concepts of energy and entropy. We are interested in, basically, how much entropy we can create using what we call an "energy source" (sun, oil, wind, whatever).
And here is the point of the discussion: you can measure the energy embedded in a barrel of oil and compare it to the energy embedded in a lithium battery. But the battery will dissipate that energy in the form of electric power at more than 90% efficiency. To obtain the same amount of work from the oil contained in the barrel, you have to go through a series of steps, including transporting, processing, refining, more transporting, and finally burning it inside a thermal engine that, typically, has an efficiency of about 30%. Not all energies are created equal!
That's the key point of the reasoning in Murphy's paper. They note, correctly, that the EROI of crude oil is often measured at the "mine mouth" or "well mouth." That is, it does not include the energy lost in the various steps needed to turn the oil into useful energy. They use the term EROI(POU) (point of use) to indicate the correct way of estimating the EROI of crude oil when it is a question of comparing it with that of solar or wind energy, which directly produce useful electric energy.
In this procedure, it is perfectly reasonable that the EROI of oil at the "mine mouth" or "well mouth" has no importance in determining the EROI at the point of use (POU). It is because a multi-stage EROI chain works like a metal chain: it is as strong as its weakest link. In the ratio of "Energy Out" to "Energy In," the first term is the energy produced by the last step of the chain, instead, the "Energy in" is the energy lost (and hence in need to be replaced) at each step. We could write that:
EROI = Eout/(Ein(1) + Ein(2) + Ein(3) +.....).
And you see that if, say, Ein(2) (refining) is much larger than Ein(1) (extraction), then reducing Ein(1) (increasing the EROI of extraction) will have no significant effect on the overall EROI. Note that in this view, all energy inputs are treated as the same. They may not be in terms of monetary costs, but it is another matter.
Having established that Murphy et al.'s proposal that oil's EROI is no more than 8.7 is not a mistake but a correct interpretation of the definition of EROI, we need to examine whether it is a likely interpretation of the current situation. Berman criticizes it on the basis of several observations; for instance, that it would mean that refining would be at best an unprofitable business, which is not.
I trust Art completely if he says that refining is profitable. But we don't have a precise correspondence between profitability and EROI. Besides, if we think of an EROI of 8.7 in financial terms, you would be very happy the return on your investment is more than 8 times the capital invested! The problem, here, is that the EROI is a ratio of two energy flows, but it says nothing about how large these flows are. If they are very small, of course, it matters little how large the EROI is. Here, Berman makes a correct point when he notes that,
"Society does not function and survive on the per-unit net energy to society but on the full-system net energy delivered to society. This is like saying that I can solve my personal financial problems by delivering newspapers because the per-unit returns are so high. The net income from the paper route is so small, however, that it wouldn’t even help with the monthly escrow payment on my mortgage."
Equivalently, we could say that engaging in a career as a beggar requires a very small initial investment, and hence it has a high ROI, but it is not a good way to make a living. Nevertheless, while this is true in financial terms, in terms of energy production it is a restatement of what I called the "
Godzilla Egg" fallacy: a small egg does not mean that the adult creature will be small. Obviously, renewables will not solve any problem as long as the energy they provide to society is small -- no matter how low the cost. But, of course, renewables can grow
Their potential of renewables in terms of solar energy available is enormous, even though we may run into other kinds of limitations in terms of mineral resources. But, at present, these limits are not preventing renewables from growing fast, and their good EROI indicates that the materials used can be effectively recycled using the energy that renewables themselves produce. Some European economies already produce half or more of their electric power from renewable sources, for instance, Germany. So, it is possible to move onward and create a sustainable energy infrastructure that will last for a long time and that will sustain a resilient human civilization, not anymore depending on the vagaries of the depletion of mineral energy resources.
There are many more points that could be discussed in relation to Berman's post, mainly about the idea that the low EROI of fossil fuels cannot be so low as some studies indicate because it would be insufficient to sustain a complex industrial civilization such as ours. That would require a long discussion. Let me just say, here, that the "minimum EROI needed" for civilization is, at best, a debatable concept and that the value of "5-7" should be understood as highly uncertain, to say the least.
I think these are the main elements of the story. If you want to know more about the concept of EROI as an essential element of biophysical economics, I suggest two recent papers that I published together with my coworkers Perissi and Lavacchi
The Role of Energy Return on Energy Invested (EROEI) in Complex Adaptive Systems, by Ilaria Perissi, Alessandro Lavacchi, and Ugo Bardi), Energies, 2021
Peaking Dynamics of the Production Cycle of a Nonrenewable Resource, by Ilaria Perissi, Alessandro Lavacchi, and Ugo Bardi, Sustainability 2023