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PeakOil is You

Is EROEI Important? Pt. 2

General discussions of the systemic, societal and civilisational effects of depletion.

Is EROEI important?

Yes
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No
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Total votes : 74

Re: Is EROEI important?

Unread postby ROCKMAN » Wed 03 May 2017, 20:23:33

S - I never argued that EROEI was neither popular nor unimportant. Just that the concept was generally unknown in the oil patch and thus of no utility in the decision to drill...past, present or future.

Then the obvious just jumped up and slapped me in the head: the cornucopian position that EROEI was declining and leading us to ruin. And then it popped to mind: the world, especially the industrialised world, has boomed for about 100 years. And every step of the way the EROEI of electricity generation was negative.

So as long as oil/NG development is positive how bad could the situation be? LOL.
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Re: Is EROEI important?

Unread postby Squilliam » Wed 03 May 2017, 21:13:53

R - Yep exactly. The language people use is value. Is it worthwhile to do something, or is it not. It doesn't matter if it costs energy so long as the overall cost structure reflects the true costs of doing business. If something is complex (fusion) and requires a heck of a lot of specialised skill to implement it doesn't matter if it has an EROEI of 10,000 if it requires 1,000 engineers to be trained for 40 years to figure out how to develop it. Money tells us if something is worthwhile to start, operate or end.

What people miss about oil, or electricity is the value of form of energy that is embodied. A barrel of oil is a store of energy as well as a means to transmit/move that energy and a source of energy. It doesn't matter if oil is no longer an overall source of energy so long as other forms of energy are available to take up the slack. EROEI for oil could easily go negative and it wouldn't matter so long as alternative energy sources were positive and large enough to make up the difference.
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Re: Is EROEI important?

Unread postby ROCKMAN » Wed 03 May 2017, 21:36:53

S - Yes. But such a simple dynamic as you describe seems to be beyond the comprehension of so many. As they say: it ain't rocket science. But it ain't petroleum geology or engineering either. LOL.
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Re: Is EROEI important?

Unread postby Squilliam » Wed 03 May 2017, 22:07:52

R - The same reason why people deny basic settled science like evolution, or plate tectonics or dare I say it... climate change. They want to believe! It doesn't matter how many times you tell them something else, so long as it doesn't concord with their beliefs and challenges their world view they will reject it.

Take a look at this: http://theoatmeal.com/comics/believe

Sure it's trying to support a rather crazy leftist position, but it applies to pretty much everything. Some facts just can't sink in because the people don't want them to.
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Re: Is EROEI important?

Unread postby ralfy » Wed 03 May 2017, 22:29:26

Squilliam wrote:Rock -- the reason why EROEI is so popular is that it fits into the doomer model. It's like a messiah complex where these people will come down from the mountain with the tablets of EROEI and overshoot, and whatever else and educate the people who will then follow them for leading the way to salvation, or something like that.


It's popular not because it "fits into the doomer model" but into reality. That is, given a limited biosphere, diminishing returns will eventually take place.
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Re: Is EROEI important?

Unread postby ralfy » Wed 03 May 2017, 22:39:03

ROCKMAN wrote:S - I never argued that EROEI was neither popular nor unimportant. Just that the concept was generally unknown in the oil patch and thus of no utility in the decision to drill...past, present or future.

Then the obvious just jumped up and slapped me in the head: the cornucopian position that EROEI was declining and leading us to ruin. And then it popped to mind: the world, especially the industrialised world, has boomed for about 100 years. And every step of the way the EROEI of electricity generation was negative.

So as long as oil/NG development is positive how bad could the situation be? LOL.


The population boomed, too, which means even more oil and other resources will be needed to support basic needs. And since it's a global capitalist system, the middle class is booming as well, which means even more resources will be needed. At the same time, more energy will be required to get various material resources because of diminishing returns.

That means energy returns will not only have to be positive but even increasing until that population stabilizes and even goes into a slow decline due to prosperity and aging. Otherwise, it may peak and drop for reasons most want to avoid.
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Re: Is EROEI important?

Unread postby ralfy » Wed 03 May 2017, 22:43:43

Squilliam wrote:R - Yep exactly. The language people use is value. Is it worthwhile to do something, or is it not. It doesn't matter if it costs energy so long as the overall cost structure reflects the true costs of doing business. If something is complex (fusion) and requires a heck of a lot of specialised skill to implement it doesn't matter if it has an EROEI of 10,000 if it requires 1,000 engineers to be trained for 40 years to figure out how to develop it. Money tells us if something is worthwhile to start, operate or end.

What people miss about oil, or electricity is the value of form of energy that is embodied. A barrel of oil is a store of energy as well as a means to transmit/move that energy and a source of energy. It doesn't matter if oil is no longer an overall source of energy so long as other forms of energy are available to take up the slack. EROEI for oil could easily go negative and it wouldn't matter so long as alternative energy sources were positive and large enough to make up the difference.


The catch with using money is that creditors want steady and good returns, and given competition, increasing. That means energy returns will not only have to be positive but high, and not just high but increasing.

Finally, what most miss about alternative energy sources is that they require oil, and are needed by a growing population, with a growing middle class, fueled by a finance industry that needs to create more credit each time, in a limited biosphere that won't allow it. Hence, diminishing returns.
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Re: Is EROEI important?

Unread postby ralfy » Wed 03 May 2017, 22:45:47

ROCKMAN wrote:S - Yes. But such a simple dynamic as you describe seems to be beyond the comprehension of so many. As they say: it ain't rocket science. But it ain't petroleum geology or engineering either. LOL.


And then we have the peak oil dynamic, which shows that it is not as simple as most imagine.
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Re: Is EROEI important?

Unread postby ralfy » Wed 03 May 2017, 22:48:24

Squilliam wrote:R - The same reason why people deny basic settled science like evolution, or plate tectonics or dare I say it... climate change. They want to believe! It doesn't matter how many times you tell them something else, so long as it doesn't concord with their beliefs and challenges their world view they will reject it.

Take a look at this: http://theoatmeal.com/comics/believe

Sure it's trying to support a rather crazy leftist position, but it applies to pretty much everything. Some facts just can't sink in because the people don't want them to.


Actually, climate change is not "basic settled science" but complex. The catch is that deniers see that complexity as something in their favor. They don't realize that it's the other way round.

The same goes for seeing energy return as irrelevant. The premise is that the it merely involves money: just create more credit and our problems are solved. But that's not what we're seeing.
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Re: Is EROEI important?

Unread postby Squilliam » Thu 04 May 2017, 01:21:54

@Ralfy: Reality is better reflected in the real economy rather than some contrived metric. The question about whether or not something is worthwhile to do should be deliniated in the fashion that everyone understands -- money. To use something else is not a useful kind of jargon. It doesn't mean anything to the wider industry we describe, nor to the regular people, and even for those that are familiar with it EROEI is a misunderstood metric. Anything less than 2.0 is a potential problem, but more than that is perfectly fine.

The opportunity cost of current v future cost or externalities can and should be deliniated in money. It is the unit that the economy operates with, so why not use it? Just because certain factors are not taken into consideration with the current regulation paradigm doesn't mean we should throw the baby out with the bath water because some people are unhappy with the status quo.

One important consideration for finance is that it monetises optimism -- the belief things will get better in the future. Without optimism there is no real option to fund any alternatives to the current paradigm. The end of optimism could effectively be the end of our ability to make material changes to the way the economy functions. Pessimism in this instance is doom because it removes the option to make relevant changes. The fact that the current system is unequal does not remove the fact that much of it works very well with respect to sending signals within the economy to rational actors, and those in the energy industry are more often than not rational actors.
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Re: Is EROEI important?

Unread postby Squilliam » Thu 04 May 2017, 02:05:50

ralfy wrote:
Squilliam wrote:R - The same reason why people deny basic settled science like evolution, or plate tectonics or dare I say it... climate change. They want to believe! It doesn't matter how many times you tell them something else, so long as it doesn't concord with their beliefs and challenges their world view they will reject it.

Take a look at this: http://theoatmeal.com/comics/believe

Sure it's trying to support a rather crazy leftist position, but it applies to pretty much everything. Some facts just can't sink in because the people don't want them to.


Actually, climate change is not "basic settled science" but complex. The catch is that deniers see that complexity as something in their favor. They don't realize that it's the other way round.

The same goes for seeing energy return as irrelevant. The premise is that the it merely involves money: just create more credit and our problems are solved. But that's not what we're seeing.


I'm not saying to 'just create more credit'. The economy functions on more levels than finance. It represents the distribution of resources as well, and credit is simply part of that. Create more credit? No. However if the right signals are sent, and there is a fair balance between energy types then a transition can and will be made. All we need is a fair balance between the costs/externalities would be nice.
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Re: Is EROEI important?

Unread postby dolph » Thu 04 May 2017, 02:07:37

My response to whether EROEI is important: yes and no.

Yes in the sense it's the main factor in the decline of the real economy.

But the economy in which we live has been financialized, so this decline is papered over with debt. Declining EROEI is in essence replaced with debt, until a final collapse of the financial system which may be anytime, or may be yet decades away.
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Re: Is EROEI important?

Unread postby sjn » Thu 04 May 2017, 02:25:51

Squilliam wrote:@Ralfy: Reality is better reflected in the real economy rather than some contrived metric. The question about whether or not something is worthwhile to do should be deliniated in the fashion that everyone understands -- money. To use something else is not a useful kind of jargon. It doesn't mean anything to the wider industry we describe, nor to the regular people, and even for those that are familiar with it EROEI is a misunderstood metric. Anything less than 2.0 is a potential problem, but more than that is perfectly fine.
Only if you ignore entropy. It also depends on how much complexity exists in the complete (eco-)system you are supporting though that EROEI 2.0 process of which it is itself a sub-system. You need to consider the complete (eco-)system. It reminds me of the discussions I had previously about the net-energy of Saudi Arabia, with their petro-economy: In SA, it is obvious you can not separate the "economy" which provides incentives and services to the population from the oil industry, one exists only to make the other possible so in calculating you have to include the water desalination, the social infrastructure, the bread and circuses. It's all necessary, else there is no energy production.

The opportunity cost of current v future cost or externalities can and should be deliniated in money. It is the unit that the economy operates with, so why not use it? Just because certain factors are not taken into consideration with the current regulation paradigm doesn't mean we should throw the baby out with the bath water because some people are unhappy with the status quo.
This requires the commodification of all (eco-)system services. Do you like breathable air? Drinkable water? What is it worth to you in monetary terms? What about the natural world outside the human construct? What is its financial worth?
One important consideration for finance is that it monetises optimism -- the belief things will get better in the future. Without optimism there is no real option to fund any alternatives to the current paradigm. The end of optimism could effectively be the end of our ability to make material changes to the way the economy functions. Pessimism in this instance is doom because it removes the option to make relevant changes. The fact that the current system is unequal does not remove the fact that much of it works very well with respect to sending signals within the economy to rational actors, and those in the energy industry are more often than not rational actors.

Optimism does indeed keep the system going, but it doesn't magically enable alternatives to the current paradigm, quite the opposite. Faith that things will get better, or that everything will be okay is a disincentive to make changes, in fact it precludes changes. How can you talk about optimism and rationality at the same time? Optimism isn't rational. If actors are rational they are not optimists, and vis-versa, they have a bias, even while it helps maintain the status-quo. http://insights.som.yale.edu/insights/is-optimism-rational
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Re: Is EROEI important?

Unread postby sjn » Thu 04 May 2017, 02:38:22

ROCKMAN wrote:S - Yes. But such a simple dynamic as you describe seems to be beyond the comprehension of so many. As they say: it ain't rocket science. But it ain't petroleum geology or engineering either. LOL.

When dynamics in physical reality seem simple, chances are you're missing something. With all the criticism of the "Left", it's interesting to note that one of the defining characteristics of the Left-vs-Right is the "Left" accepts complexity (and grey areas), and that there are rarely simple answers, whilst the "Right" sees things more black-and-white, simplifies problems and proposes "common-sense" solutions. In human politics, they each have their place, and can be useful. On the other hand, Systems-science is the study of complex systems, which is where the EROEI metric comes from... so...
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Re: Is EROEI important?

Unread postby Squilliam » Thu 04 May 2017, 03:24:10

@sjn: Money does account for the complexity of a society. The problem with money is that it does not account for the complexity of the ecology that the economy is based in. The current economic system can respond somewhat to ecological stimulus, but it cannot really address the problems with short term thinking, or lack of externalities. Something like ecological economics might work a lot better than the current neo-liberal paradigm, but really there is a hell of a lot that will probably work better.

https://en.wikipedia.org/wiki/Ecological_economics

When talking about optimism I refer really to the concept that people trust that when they lend their fiat money to the bank that they can get it out again, and when they do it'll be worth something. It's the kind of thinking that you need to have when you're 18 and establishing a savings account for retirement. If people cannot trust the basic tenets of the economy and trust falls over then we truly are screwed. In that environment you can't make any material changes for the better. Although I suppose you could call it positive realism if you want a better descriptor maybe?

With respect to the left and right I would say that the analysis itself is screwed up by the fact that those that have done it are coming at it from a biased perspective. Academia is most definitely left leaning, and a common heuristic is that left = good/smart/virtuous and right = bad/dumb/ignorant/bigot. The fact that certain systemic thinkers tend to congregate on the left doesn't necessarily mean that it is always the case. In the past left used to mean religious, so those without that religious bent were right wing.
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Re: Is EROEI important?

Unread postby sjn » Thu 04 May 2017, 03:49:10

In the past left used to mean religious, so those without that religious bent were right wing.

When and where? I've never head of that before. My understanding of the history is it emerged from the Revolutionary French National Assembly, where the Royalists sat on the right, and the Revolutionaries sat on the left. The Right were throughout subsequent history defined through their belief in order, moral absolutism and defence of social hierarchy (necessarily dogmatic and conservative- not naturally given to acceptance of complexity or change). Whilst the Left consisted at different times of various revolutionaries, radicals, socialists, anarchists etc.
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Re: Is EROEI important?

Unread postby Squilliam » Thu 04 May 2017, 05:38:35

Hmm... might have mixed that one up sorry. I think I read something somewhere that the democrats were the religious party before the abortion debate, and the republicans were the party of scientists and engineers. Though to be honest it doesn't necessarily mean that they were left/right wing respectively.
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Re: Is EROEI important?

Unread postby ralfy » Thu 04 May 2017, 07:28:53

Squilliam wrote:@Ralfy: Reality is better reflected in the real economy rather than some contrived metric. The question about whether or not something is worthwhile to do should be deliniated in the fashion that everyone understands -- money. To use something else is not a useful kind of jargon. It doesn't mean anything to the wider industry we describe, nor to the regular people, and even for those that are familiar with it EROEI is a misunderstood metric. Anything less than 2.0 is a potential problem, but more than that is perfectly fine.

The opportunity cost of current v future cost or externalities can and should be deliniated in money. It is the unit that the economy operates with, so why not use it? Just because certain factors are not taken into consideration with the current regulation paradigm doesn't mean we should throw the baby out with the bath water because some people are unhappy with the status quo.

One important consideration for finance is that it monetises optimism -- the belief things will get better in the future. Without optimism there is no real option to fund any alternatives to the current paradigm. The end of optimism could effectively be the end of our ability to make material changes to the way the economy functions. Pessimism in this instance is doom because it removes the option to make relevant changes. The fact that the current system is unequal does not remove the fact that much of it works very well with respect to sending signals within the economy to rational actors, and those in the energy industry are more often than not rational actors.


Energy return is not a contrived metric. That's why we have diminishing returns.

Money, though, is a contrived metric. That's why we have money multipliers.
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Re: Is EROEI important?

Unread postby ralfy » Thu 04 May 2017, 07:32:06

Squilliam wrote:
ralfy wrote:
Squilliam wrote:R - The same reason why people deny basic settled science like evolution, or plate tectonics or dare I say it... climate change. They want to believe! It doesn't matter how many times you tell them something else, so long as it doesn't concord with their beliefs and challenges their world view they will reject it.

Take a look at this: http://theoatmeal.com/comics/believe

Sure it's trying to support a rather crazy leftist position, but it applies to pretty much everything. Some facts just can't sink in because the people don't want them to.


Actually, climate change is not "basic settled science" but complex. The catch is that deniers see that complexity as something in their favor. They don't realize that it's the other way round.

The same goes for seeing energy return as irrelevant. The premise is that the it merely involves money: just create more credit and our problems are solved. But that's not what we're seeing.


I'm not saying to 'just create more credit'. The economy functions on more levels than finance. It represents the distribution of resources as well, and credit is simply part of that. Create more credit? No. However if the right signals are sent, and there is a fair balance between energy types then a transition can and will be made. All we need is a fair balance between the costs/externalities would be nice.


Actually, it functions essentially in terms of credit. That's why its indicators, from GDP to debt, involve money as a metric.

Also, credit doesn't represent resources. That's why the notional value for shadow derivatives alone is much larger than the size of the global economy, which itself is also measured in terms of credit:

http://www.washingtonsblog.com/2012/05/ ... arket.html

You might be talking about another planet.
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Re: Is EROEI important?

Unread postby ralfy » Thu 04 May 2017, 07:34:24

Squilliam wrote:@sjn: Money does account for the complexity of a society. The problem with money is that it does not account for the complexity of the ecology that the economy is based in. The current economic system can respond somewhat to ecological stimulus, but it cannot really address the problems with short term thinking, or lack of externalities. Something like ecological economics might work a lot better than the current neo-liberal paradigm, but really there is a hell of a lot that will probably work better.

https://en.wikipedia.org/wiki/Ecological_economics

When talking about optimism I refer really to the concept that people trust that when they lend their fiat money to the bank that they can get it out again, and when they do it'll be worth something. It's the kind of thinking that you need to have when you're 18 and establishing a savings account for retirement. If people cannot trust the basic tenets of the economy and trust falls over then we truly are screwed. In that environment you can't make any material changes for the better. Although I suppose you could call it positive realism if you want a better descriptor maybe?

With respect to the left and right I would say that the analysis itself is screwed up by the fact that those that have done it are coming at it from a biased perspective. Academia is most definitely left leaning, and a common heuristic is that left = good/smart/virtuous and right = bad/dumb/ignorant/bigot. The fact that certain systemic thinkers tend to congregate on the left doesn't necessarily mean that it is always the case. In the past left used to mean religious, so those without that religious bent were right wing.


No, it doesn't. That's why ecological economics was necessary.
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