For the first time in history, in the wake of the corona crisis, US oil prices have gone negative thanks to record lows in global oil demand. This pandemic has revealed deep-seated structural vulnerabilities in our fossil fuel-dependent economy. The most important scientific concept needed to understand these vulnerabilities is ‘Energy Return on Investment’ (EROI).
EROI measures how much energy is used to extract energy from a particular resource. What’s left is known as surplus ‘net energy’ which supports goods and services outside the energy system. The higher the ratio, the more surplus energy is left for the economy. That surplus is running increasingly thin.
In the early 20th century, the EROI of fossil fuels was sometimes as high as 100:1, meaning that a single unit of energy would be enough to extract a hundred times that amount. But since then, the EROI of fossil fuels has dramatically reduced. Between 1960 and 1980, the world average value EROI for fossil fuels dropped by more than half, from about 35:1 to 15:1. It is still declining – latest estimates put the value at between 6:1 and 3:1.
This has exerted a ‘brake’ on the rate of economic growth for the world’s advanced industrial economies, which has decreased since the 1970s. Europe is a locus-point for these trends. By the turn of the century, all conventional oil producers across the continent – except perhaps Italy – were past their peak production.
The pandemic was a pin that burst this oil bubble
Globally, conventional crude oil has entered a long plateau for the past decade and a half. To meet demand, the industry shifted to more expensive unconventional forms, with US shale supplying over 70% of global oil supply growth.
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