Andrew. Thank you for your comment in response to mine, particularly where you discuss the net energy return, which you say for oil sands are currently estimated between 7.2 and 1.5:1.

I acknowledge that in terms of direct environmental impacts, and also in relation to CO2 emissions, these low ratios seem to be showstoppers. However, I am in the camp that considers that the direct environmental impacts can be managed responsibly, and also in the camp that is far from convinced that anthropogenic CO2 emissions are a serious concern.

However, I respectfully suggest that it is useful to consider the economics of the net energy return. Lets use the worst example you cited of 1.5:1. It would cleary be a real problem if the price used for the energy needed to extract the energy was the same as the price that the produced energy is sold for. For example, if the price for the energy produced is USD100 per bbl and the price of the energy used was also USD100 per bbl.

That is clearly not the case. The energy used in the production process will be low grade energy close to the source, and the likely cost of that energy is likely to be, lets say, USD10 per bbl, and it could be a lot less. In that case, if everything else works, then the economics could be highly attractive, especially if the offtake price were a 20 year fixed price contract.

The low ratio does mean that the recoverable resource is reduced, but most of the resources being considered are very large, and that may not be a factor.

I may have this wrong. If so, please let me know.

Herbert,

Economics is a secondary consideration when considering EROEI. Environmental and C02 emission issues aside if the net energy return of the tar sands is 1.3:1 it takes almost the same amount of energy to extract one barrel of oil as if gained from that barrel. What this means is that modern society fails continue operating because the majority of energy is used to extract more energy, rather than having huge surpluses that we have seen over the last 150 years that let us grow economies and produce luxury items etc.

Chris Martenson has an excellent 12 minute video that explains it better than I do: http://www.chrismartenson.com/crashcourse/chapter-17b-energy-budgeting

A mind exercise highlights the REALITY of imminent PEAKOIL:

Suppose Oil deliveries globally shut down tomorrow.

No trucks to deliver coal to power stations would cut electricity within a week. It would cut what few nuclear plants there are within a year.

Police could not attend melees over petrol theft within a week or so. Civil strife would become incendiary within two months. Only hermits and the motor cycle thugs would prevail. Mad Max within 6 months.

What that tells us is that all alternative energy schemes are a combination of covert and overt governmental taxpayer funded subsidies. Every company from CSG to coal are double dipping into the public's purse to GET a business and a life. They are not supplying NET energy to the market!

In return we get environmental degradation, biodiversity elimination, maniacal, schizoid politicians who have to find clumsy excuses to immigrate their constituencies because everyone hates them and we get the social disruption costs of that.

As Caltex has just pulled the pin on 800 workers and may leave Australia without refining capacity, the above scenario MAY come to play by 2015 instead of the 2025 to 2030 deadline proposed in the Pentagon Papers.

So don't believe beneficiaries of this insane social scheme when they say: "we have already TOLD you this can never happen".

Consider: We are here because our DNA evolved in the cauldron of Geothermal-Hydrology and molten-rock chemistry. Also Oil's Heat capacity is over 90% Geothermal in origin and yet oil companies only provide token media recognition. They pump billions into insignificant solar and wind strategies that totally depend on oil.

It is not sufficient for Australia to maintain refining capacity. We must also have a solid & expanding Geothermal power program that uses Hydrogen cutting heads to vaporise rock at the rate of 7Km/ month with up to 20 geothermal wells per production site. An onshore Turbine and generator manufacturing facility is also mandatory JUST to provide High tech jobs as a reversal of the utter humiliation that the ABBOTtisation or offshoring of EVERY manufacturing capability has created in this nation.

Andrew. I watched the Chris Martenson presentation, but colour me unconvinced.

He, like you, airily says to wave away economics, just look at the net energy balance in terms of Energy Out v Energy In. His points are valid, but only if the cost of the Energy In is the same as the cost of the Energy Out.

However, at least in some situations, that is NOT true. For example, as I already explained, in some of the alternative energy projects using waste energy, or low-grade resources at cost, the cost of the barrel of Energy In could be, say, $10, whereas the sale price of the Energy Out could be $100 per bbl. If that were the case, then the economics could be just fine.

What I am saying is that the economics will vary project by project. Some are likely to work at a net energy ratio of 1.5:1 whereas others won't. There is no option but to go into the detail of each project and see if they work economically (and environmentally) or not.

Clearly you cannot ignore economics. They will always dictate whether a project will proceed or not.

The trends of peak oil settle out to two different streams.
The first, geology gives a certain depletion rate.
The second economy gives a slower depletion rate.

The IMF has recently produced a model that combines both models and
as might be expected produces a depletion rate between the two other models.

Here is a link to an article about the IMF model.

http://www.theoildrum.com/node/9182
by Posted by Gail the Actuary

No matter how people argue about the effect of price, geology will
eventually trump economics.
We will always have enough oil for urgent usages such as medical plastics.

Those that still say there is plenty of oil and we will never run out
are in the same group as those that believe that aliens have been visiting earth.

I mentioned two trend beliefs above but there is a third that is sure
that there is a magic silver bullet somewhere.
The latest magic silver bullet is cold fusion.
Well, maybe, but that is their best bet.