I dump 1000 BTUs of natural gas (costing $1/1000BTUs) into extracting 100 BTUs of tar sand oil (sold at $10 per 100 BTUs) I make money hand over fist while suffering an EROEI < 1.
Exactly. I believe that if EROEI were important we'd have long replaced fossil ICE vehicles with something else. They are only about 25% efficient well to wheel even before we started scraping tar sand yet we can't get enough.
The benefit of oil is not so much its free energy quotient, but its energy density and transportability, It is so valuable as an energy carrier we've always wasted at least 80% of it's energy in IC engines, yet built a world with it.
The utility is far more important than the erei. An accessible example is bucking and splitting firewood. By hand it is lots of work but with a gallon of gasoline for a chainsaw and splitter it is hardly enough work to break a sweat. I would pay $20 gal or more for oil produced at an energy deficit using LP, coal, windmils or donkeys, plus many hundreds for the equipment, because the utility is so high.
Utility is the key to peak oil, not eroei. As geology slows production flow, the oil price will be bid higher and higher. The market will eliminate demand through price rationing, the winner will always be the use with the highest utility.