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

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  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 >>
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    Proper management of working capital is essential to a company’s fundamental financial health and operational success as ... Read Full Answer >>
  3. 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 >>
  4. 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 >>
  5. How can I find net margin by looking a company's financial statements?

    In finance and accounting, financial statements represent the fundamental means of analyzing a company's financial position, ... Read Full Answer >>
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