The Most Important Aspect that most Economists and Analysts fail to Recognize

Some Basic EROI ratios

1) Hunter Gatherer = 10:1

2) Farmer, Horse & Plow & Pre Industrial transportation= 10-20: 1

3) High Tech Farmer & Modern Distribution-Transportation = 1:16

If you look at the ratios you will realize that men gathering and harvesting food in the good ole days were much more productive than the modern farmer sitting in his air conditioned quarter million dollar John Deere tractor today. For instance, a typical pre-industrial farmer with a horse and plow could produce 10 units of energy (food) by only expanding 1 unit of energy (work). The modern agricultural practices of the past 50-70 years have been possible only with high EROI. The present system of food production and distribution is devouring 16 times the energy to supply only 1 unit of energy in the form of food.

Many people believe that technology will solve our future problems, but as you can see from the ratios above, technology has done just the opposite. The modern food production and distribution system has been a huge net drain on our vital resources. If technology was used correctly in the benefit of mankind, it would have been utilized to increase the EROI not decrease it. This wasn’t much of a problem with cheap and abundant energy, but now that the world is peaking in global oil production higher prices and volatility are here to stay.

Peak Oil and EROI

There has been great debate about the timing of the Global Oil Peak. Many believe we have reached peak oil already. Here is a modern graph of M. King Hubbert’s World Peak Oil Graph, which he presented in 1956.

[graph]

If it is true, that the world is peaking in oil production, it has serious ramifications for the Global Economy. The only way an economy can grow is by growing its energy source. Any economist will tell you the best way for any country to pay back its debts and the interest on those debts is in a growing economy. Thus, a declining energy supply will contract the Global Economy. The decline of oil production as Hubbert predicted is not as simple as his uniform bell curve represents. It would be nice to rely upon all that oil on the downward slope of the graph; unfortunately, EROI will produce a much different picture.

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