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. Alternative Energy ETF

    An exchange-traded fund that invests in companies engaged in ...
  2. Wholesale Energy

    A term referring to the purchase and sale of energy products ...
  3. Barrel Of Oil Equivalent (BOE)

    A term used to summarize the amount of energy that is equivalent ...
  4. Energy Derivatives

    A derivative instrument in which the underlying asset is based ...
  5. Energy Tax

    A surcharge on fossil fuels such as oil, coal and natural gas. ...
  6. Energy Institute - EI

    An organization based in London, England, that was formed as ...
Related Articles
  1. Markets

    The US Is Becoming More Energy Independent

    Rising production and abundant shale oil and gas reserves are moving the US towards energy independence, which could happen by 2020
  2. ETFs & Mutual Funds

    The Future Of Green Technology Investing

    Other endeavors may be experiencing a credit crunch, but investing in energy conservation, sustainable energy and resource maximization is on the rise.
  3. ETFs & Mutual Funds

    How To Capitalize On Rising Energy Prices

    The world's energy demands will keep rising as supplies become harder to find and exploit. These factors should propel a energy stock bull market for some time to come.
  4. ETFs & Mutual Funds

    Big Buys In Renewable Energy

    As oil prices have fallen, so has the alternative energy sector. For investors with a long-term focus, the time could be right to add the sector to an energy portfolio.
  5. Markets

    The Debt Report: The Energy Sector

    Discover how the energy sector bit off more debt than it could chew, and learn why the energy bond contagion has market analysts worried about the economy.
  6. Markets

    4 Things to Know About the Future of US Energy

    The fracking revolution has underpinned the U.S. energy industry in recent years, with positive trends likely to continue into the next decade.
  7. Personal Finance

    Green Energy: Why We're Still Not Using It

    The reason we are still dependent on fossil fuels for energy is about as old as the fossils themselves. Read on to find out why.
  8. ETFs & Mutual Funds

    Top 2 Vanguard Energy ETFs and Mutual Funds (VDE)

    Read detailed analyses of an energy exchange-traded fund (ETF) and an energy mutual fund issued by Vanguard, and learn about their characteristics and historical statistics.
  9. ETFs & Mutual Funds

    Mutual Funds Vs. ETFs: Energy

    There are a number of choices to gain exposure to the energy sector. We go over some of the more prominent options.
  10. Financial Advisor

    Top Investment Banks In The Energy Industry (JPM, C)

    Many global Investment banks are highly involved in the energy industry, but there are also some smaller banks and boutiques that are strong players.
RELATED FAQS
  1. What factors are the primary drivers of share prices in the oil and gas sector?

    Learn the primary drivers behind changes in the share prices of the oil and gas sector. The oil and gas sector is a cyclical ... Read Answer >>
  2. How much of the United States' energy comes from oil and gas?

    Examine the energy sources for the United States, and learn how much of the total U.S. energy supply comes from the oil and ... Read Answer >>
  3. How much of the United States' energy is produced within the country?

    Learn how much of the United States' energy is produced within the country. Fracking has been a game changer in terms of ... Read Answer >>
  4. How can I make my home run on energy that is 100% off the grid?

    Taking a home 100% off the grid requires paying attention to all sources of energy in the home. These sources include more ... Read Answer >>
  5. What kind of companies in the utilities sector offer the most stable dividends for ...

    Discover three of the most solid companies operating in the utilities sector that offer the most stable dividends to investors ... Read Answer >>
  6. What debt level should I look for when investing in an oil and gas company?

    Companies in the oil and gas sector with high debt loads outperform when energy prices rise, however they are vulnerable ... Read Answer >>
Hot Definitions
  1. Glass-Steagall Act

    An act the U.S. Congress passed in 1933 as the Banking Act, which prohibited commercial banks from participating in the investment ...
  2. Quantitative Trading

    Trading strategies based on quantitative analysis which rely on mathematical computations and number crunching to identify ...
  3. Bond Ladder

    A portfolio of fixed-income securities in which each security has a significantly different maturity date. The purpose of ...
  4. Duration

    A measure of the sensitivity of the price (the value of principal) of a fixed-income investment to a change in interest rates. ...
  5. Dove

    An economic policy advisor who promotes monetary policies that involve the maintenance of low interest rates, believing that ...
  6. Cyclical Stock

    An equity security whose price is affected by ups and downs in the overall economy. Cyclical stocks typically relate to companies ...
Trading Center