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  Exxon et al. are on track for a bailout that will make the financial rescue of ‘08 look like handing a lollypop to a child. Oil companies – no matter what you think of them – create an essential product for modern society. Covid has caused a temporary surplus of crude which in turn has brought down prices significantly. US producers have been leaning heavily on horizontal / fracking to extract oil. This method of extracting oil is considerably more expensive than traditional drilling.   The reason why oil companies are going that more expensive route is because there are fewer and fewer vertical drilling locations available that economically make sense -we are running out of the affordable oil that society is built on. The result of companies switching to more expensive production is that – for example – the free cashflow from Exxon has dropped from 30-40bn/year in the mid 2000’s to 5-10bn with more and more quarters showing negative cashflow. XOM is borrowing money to pay dividends.

Energy Return On Energy Invested and its variations is a metric frequently used to look at our efficiency in harvesting energy with respect to the energy input. As an aside, regarding fossil fuels in day to day use we talk about energy production when strictly speaking we don’t produce coal/oil/gas but extract it and sometimes convert it.   Strictly technically speaking fossil fuels as well as renewables are solar energy; one is previously accumulated stock and the other is flow. Think balance sheet versus income statement. EROEI is an attractive concept but has a number of issues which can reduce its utility significantly.   The main issue with EROEI is that it suffers from boundary issues along a number of vectors. 1.        The first boundary issue is that although it is relatively easy to measure the energy produced it is significantly more difficult to determine the energy consumed in producing the energy. Should only direct energy inputs be counted (for example the ene