Energy Return On Investment - EROI

DEFINITION of 'Energy Return On Investment - EROI'

The amount of energy that has to be expended in order to produce a certain amount of energy. The energy return on investment (EROI) is a key determinant of the price of energy, as sources of energy that can be tapped relatively cheaply will allow the price to remain low. The ratio decreases when energy becomes scarcer and more difficult to extract or produce.

BREAKING DOWN 'Energy Return On Investment - EROI'

The EROI for oil has decreased dramatically over the past hundred years. The amount of energy required to produce one barrel of oil has decreased as superior methods, such as fracking, have been introduced.


EROI = Energy Output/Energy Input

RELATED TERMS
  1. Return On Equity - ROE

    The amount of net income returned as a percentage of shareholders ...
  2. Fracking

    A slang term for hydraulic fracturing. Fracking refers to the ...
  3. Oil Field

    A tract of land used for extracting petroleum, or crude oil, ...
  4. Enhanced Oil Recovery - EOR

    Enhanced oil recovery (EOR) is the process of obtaining stranded ...
  5. Return On Average Equity - ROAE

    An adjusted version of the return on equity (ROE) measure of ...
  6. Return On Gross Invested Capital ...

    The amount that a company earns on the total investment it has ...
Related Articles
  1. Investing Basics

    Oil: A Big Investment With Big Tax Breaks

    Oil and gas investments can provide unmatched deduction potential for accredited investors.
  2. Active Trading

    Oil And Gas Industry Primer

    Before jumping into this hot sector, learn how these companies make their money.
  3. Active Trading

    Uncovering Oil And Gas Futures

    Find out how to stay on top of data reports that could cause volatility in oil and gas markets.
  4. Investing News

    Icahn's Bet on Cheniere Energy: Should You Follow?

    Investing legend Carl Icahn continues to lose money on Cheniere Energy, but he's increasing his stake. Should you follow his lead?
  5. Stock Analysis

    The Top 5 Micro Cap Alternative Energy Stocks for 2016 (AMSC, SLTD)

    Follow a cautious approach when purchasing micro-cap stocks in the alternative energy sector. Learn about five alternative energy micro-caps worth considering.
  6. Stock Analysis

    Analyzing Sprint Corp's Return on Equity (ROE) (S)

    Learn about Sprint's return on equity. Find out why its ROE is negative and how asset turnover and financial leverage impact ROE relative to Sprint's peers.
  7. Investing News

    The Next Stop for Oil: $18 a Barrel or $52?

    Predictions on the price of oil are all over the spectrum. Will it hit $18 or $52 this year (or both)?
  8. Fundamental Analysis

    5 Economic Changes to Expect if a Republican Wins in 2016

    Discover the five most likely economic changes the United States can expect if a Republican wins the presidential election in 2016.
  9. Stock Analysis

    Analyzing Oracle's Return on Equity (ROE) (ORCL)

    Learn about Oracle's ROE. How have net profit margin, asset turnover and financial leverage influenced ROE relative to peers and historical performance?
  10. Stock Analysis

    Hess Corporation: An Activist Investment Analysis (HES)

    Learn about Elliott Management's 2013 activist investor involvement with Hess Corporation. Find out what the hedge fund changed about Hess's management.
RELATED FAQS
  1. What is the difference between return on equity and return on capital?

    Return on equity (ROE) and return on capital (ROC) measure very similar concepts, but with a slight difference in the underlying ... Read Full Answer >>
  2. What is the formula for calculating EBITDA?

    When analyzing financial fitness, corporate accountants and investors alike closely examine a company's financial statements ... Read Full Answer >>
  3. How do I calculate the inventory turnover ratio?

    Managing inventory levels is important for most businesses and this is especially true for retailers and any company that ... Read Full Answer >>
  4. Why is working capital management important to a company?

    Proper management of working capital is essential to a company’s fundamental financial health and operational success as ... Read Full Answer >>
  5. What is a profit and loss (P&L) statement and why do companies publish them?

    A profit and loss (P&L) statement, or balance sheet, is essentially a snapshot of a company's financial activity for ... Read Full Answer >>
  6. What is the difference between the return on total assets and an interest rate?

    Return on total assets (ROTA) represents one of the profitability metrics. It is calculated by taking a company's earnings ... Read Full Answer >>
Hot Definitions
  1. Presidential Election Cycle (Theory)

    A theory developed by Yale Hirsch that states that U.S. stock markets are weakest in the year following the election of a ...
  2. Super Bowl Indicator

    An indicator based on the belief that a Super Bowl win for a team from the old AFL (AFC division) foretells a decline in ...
  3. Flight To Quality

    The action of investors moving their capital away from riskier investments to the safest possible investment vehicles. This ...
  4. Discouraged Worker

    A person who is eligible for employment and is able to work, but is currently unemployed and has not attempted to find employment ...
  5. Ponzimonium

    After Bernard Madoff's $65 billion Ponzi scheme was revealed, many new (smaller-scale) Ponzi schemers became exposed. Ponzimonium ...
  6. Quarterly Earnings Report

    A quarterly filing made by public companies to report their performance. Included in earnings reports are items such as net ...
Trading Center