Energy Return On Investment - EROI

AAA

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.

INVESTOPEDIA EXPLAINS '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 Gross Invested Capital ...

    The amount that a company earns on the total investment it has ...
  6. Return On Average Equity - ROAE

    An adjusted version of the return on equity (ROE) measure of ...
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 >>
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. Economics

    What is Value Added?

    Value added is used to describe instances where a firm takes a product and adds a feature that gives customers a greater sense of value.
  5. Economics

    Understanding Specialization

    Specialization is when a person, business, or region focuses their productive efforts on a smaller subset of a larger system for a competitive advantage.
  6. Economics

    What is the Breakeven Point?

    In general, when gains or revenue earned equals the money spent to earn the gains or revenue, you’ve hit the breakeven point.
  7. Mutual Funds & ETFs

    Want to Go Long Natural Gas? Eye the UGAZ ETN

    Is UGAZ the best way to play natural gas? Maybe not.
  8. Chart Advisor

    These Oil Service Stocks Are Ready For A Move Higher

    In the oil services sector, active traders have been trying hard to establish a floor and the double bottom pattern that is appearing on the chart suggests that a short-term reversal could be ...
  9. Economics

    Oil Investments Boost Egypt's Recovery Prospects

    Major foreign oil companies have provided a big boost to the Egyptian economy by agreeing to invest around US$17 billion in the country's energy sector.
  10. Economics

    Bulk Shipping Companies Struggle As Markets Soften

    The "soft" dry bulk shipping market that confronts shipping companies is a result of lower demand from China, and an excessive amount of bulk ships.

You May Also Like

Hot Definitions
  1. Price-To-Sales Ratio - PSR

    A valuation ratio that compares a company’s stock price to its revenues. The price-to-sales ratio is an indicator of the ...
  2. Hurdle Rate

    The minimum rate of return on a project or investment required by a manager or investor. In order to compensate for risk, ...
  3. Market Value

    The price an asset would fetch in the marketplace. Market value is also commonly used to refer to the market capitalization ...
  4. Preference Shares

    Company stock with dividends that are paid to shareholders before common stock dividends are paid out. In the event of a ...
  5. Accrued Interest

    1. A term used to describe an accrual accounting method when interest that is either payable or receivable has been recognized, ...
  6. Absorption Costing

    A managerial accounting cost method of expensing all costs associated with manufacturing a particular product. Absorption ...
Trading Center