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IOP PUBLISHING ENVIRONMENTAL RESEARCH LETTERS

Environ Res Lett 5 (2010) 044006 (10pp) doi1010881748-932654044006

Energy intensity ratios as net energymeasures of United States energyproduction and expendituresC W King

Center for International Energy and Environmental Policy The University of Texas at Austin1 University Station C1100 Austin TX 78712-0254 USA

E-mail careykingmailutexasedu

Received 22 July 2010Accepted for publication 14 October 2010Published 10 November 2010Online at stacksioporgERL5044006

AbstractIn this letter I compare two measures of energy quality energy return on energy invested(EROI) and energy intensity ratio (EIR) for the fossil fuel consumption and production of theUnited States All other characteristics being equal a fuel or energy system with a higher EROIor EIR is of better quality because more energy is provided to society I define and calculate theEIR for oil natural gas coal and electricity as measures of the energy intensity (units of energydivided by money) of the energy resource relative to the energy intensity of the overalleconomy EIR measures based upon various unit prices for energy (eg $Btu of a barrel of oil)as well as total expenditures on energy supplies (eg total dollars spent on petroleum) indicatenet energy at different points in the supply chain of the overall energy system The resultsindicate that EIR is an easily calculated and effective proxy for EROI for US oil gas coal andelectricity The EIR correlates well with previous EROI calculations but adds additionalinformation on energy resource quality within the supply chain Furthermore the EIR andEROI of oil and gas as well as coal were all in decline for two time periods within the last40 years and both time periods preceded economic recessions

Keywords energy net energy energy return on energy invested energy intensity energyeconomics

S Online supplementary data available from stacksioporgERL5044006mmedia

1 Introduction

Since the oil crises of the 1970s so heavily affected economicoutput in the industrialized world various researchers haveconfirmed the dependence of the modern economy on theenvironment energy and sometimes more precisely energy orexergy services (Ayres 2008 Ayres and Warr 2005 Clevelandet al 1984 2000 Costanza and Herendeen 1984 Georgescu-Roegen 1971 Kaufmann 1994 Odum 1996 Soddy 1926)Part of this pursuit revealed an understanding of not only thequantity of energy resources produced over time but also thequality Quality is measured in many ways (eg energy densitycleanliness etc) but one key measure of the systemic qualityof energy resources and systems is the energy return on energy

invested (EROI) That is to say with all other characteristicsof two energy systems technologies or resources being equalthe one with higher EROI will have a higher value to societythan the other Societies and natural systems also organizethemselves differently depending upon the EROI of theirresources (Tainter 1988 Tainter et al 2003)

For fossil energy resources analysts usually calculateEROI at the mine mouth as the energy content of the producedresource (eg oil) divided by the sum of energy inputs requiredto extract the resource (Hall et al 1986 1981) Energy priceand the total expense of purchasing end-use forms of energyalso act as system-wide economic indicators describing therole of energy in the broader economy Because energy is aninelastic good and increased energy prices are passed along to

1748-932610044006+10$3000 copy 2010 IOP Publishing Ltd Printed in the UK1

Environ Res Lett 5 (2010) 044006 C W King

other consumer goods increases in energy price tend to reducepurchases of these more elastic discretionary goods more thanenergy itself (Hall et al 2008) In the US over the pastfour decades since peak US oil production economic growthwas slow or the US was in recession whenever total energyexpenditures were both increasing and above 10 of grossdomestic product (GDP) For example in the United Statesfrom 1971 to 1981 total expenditures on energy increasedby an average of 5yr and from 1974 to 1985 over 10of GDP was spent directly on the purchase of energy (EIA2008) From 1973 to 1974 and 1979 to 1980 the politicalmotivations of the oil embargos drove the price of oil upquickly such that there were annual increases of 26 and16 respectively in the per cent of US GDP spent on energyThe combination of both high levels and sharp increases inenergy expenditures resulted in no real GDP growth for 1973ndash1975 and 1980ndash1982 While the events of the 1970s werepolitically motivated their effectiveness in causing high priceswas enabled by the physical reality of peak US oil productionin 1970 Rising energy prices driven by lower EROI couldcertainly prevent economic growth independent of politicalfactors From 2003 to 2008 energy prices and US energyexpenditures rose precipitously without any singular causalpolitical event to restrict supplies and these increases in energyprices played a major role in causing the latest recession(Hamilton 2009)

Thus the motivation for this letter is to understand howmeasures of net energy relate to broader economic indicatorsof energy such as energy price and expenditures I hypothesizethat prices of energy largely reflect their EROI EROI from USenergy data is not easy to calculate and the appropriate datafrom the US government sources are available only every fiveyears at best Thus if the hypothesis is true then a readilyavailable EROI proxy can be estimated every year In order totest this hypothesis I derive and compare a proxy measure ofEROI based upon prices and expenditures for energy I call thisproxy measure the energy intensity ratio (EIR) By calculatingEIR at different points in the supply chain I provide insightinto the energy required to produce and distribute differentforms of energy For EROI calculations I use Cleveland (2005)for US oil and gas and Hall et al (1981 1986) for US coalI show that the EIR is a simply calculated indicator that is aproxy for EROI but uses readily available data of price energycontent and energy intensity energy consumption and energyexpenses of the overall economy Because I show that EIRis a proxy for EROI EIR must be greater than one for anyenergy sector resource and technology to be a net contributorof energy to the economymdashjust as is the case with EROI

2 Definition and calculation of energy intensity ratio(EIR)

I define the EIR as the energy intensity of a fuel or energyresource divided by the aggregate economic energy intensityof a country (eg the US) Generically energy intensity isenergy consumed divided by some output or service providedThroughout this letter I use a definition of energy intensity withunits of energy per dollar and I use annual average monetary

and energy data for computations For the economy-wideor aggregate energy intensity (EIGDP) of the US I use thedefinition as its total annual energy consumption divided byits annual gross domestic product (GDP) as in (1) TheseUS-wide values of economic energy intensity are reported foreach year by the US Energy Information Administration (EIA)in the Annual Energy Review in units of British thermal unit(Btu) per dollar (EIA 2008) A low value of economic energyintensity indicates that a relatively low quantity of energyenables a relatively high amount of economic value In unitsof chained 2000 dollars1 the US economic energy intensitydropped from 19 500 Btu$ in 1950 to 8500 Btu$ in 2008(EIA 2008)

EIGDP = total energy consumption

gross domestic product

sim lsquoenergy inputrsquo

lsquoeconomic output in units of money (1)

I calculate the fuel energy intensity in two ways I defineone way using fuel price (EIfp) and the other way usingthe total expenditures for purchasing that fuel (EIfe) (see (2)and (3) respectively) As I show in this letter using bothformulations enables a broader understanding of the value ofenergy to the economy Price-based fuel energy intensity isthe energy content per unit of that fuel divided by its priceper unit (see (2)) The EIA records the combined fuel priceper Btu (eg inverse of fuel energy intensity) as well as theprice and energy content of fuels separately (EIA 2008) If thefuel energy intensity is high then fuel is cheap and vice versaExpenditure-based fuel energy intensity is the total US energyconsumption of that fuel divided by the total US expendituresfor that fuel for a given year The total energy consumptionfor each fuel is estimated as the number of units of that fuelconsumed multiplied by the average energy content per unit offuel (see (3))

EIfp = Btuunit

$unitsim lsquoenergy outputrsquo

lsquoinput price in units of moneyrsquo(2)

EIfe = (total units of fuel consumed)(Btuunit)avg

(total money spent on fuel)

sim lsquoenergy outputrsquo

lsquoinput expenditures in units of moneyrsquo (3)

From (1) economic energy intensity is lsquoenergy input to theeconomy divided by dollars given from the economy to the fuelsectorrsquo From (2) and (3) energy firms within the economylsquoproduce an energy output to the economy for a given dollarinput from the overall economyrsquo Thus by dividing (2) and (3)by (1) I obtain unitless ratios that are proportional to lsquoenergyoutput from energy-producing firms divided by energy inputto energy-consuming firmsrsquo and I call these energy intensityratios (EIR) Economic energy intensity is often used as ameasure of increasing efficiency of the economy in terms ofconverting energy to value via technical change and economicrestructuring (USDOE 2010) Thus EIR is proportional to

1 From EIA (2008) the chained dollar is a measure used to express real pricesReal prices are those that have been adjusted to remove the effect of changes inthe purchasing power of the dollar they usually reflect buying power relativeto a reference year The chained dollar is based on the average weights ofgoods and services in successive pairs of years

2


Figure 1 The US energy intensity ratios (EIR) for natural gas coal and oil show cyclical behavior and all indicators were decreasing after2003

EROI (eg energy output over energy input) and measures thefuel energy provided to the economy relative to the effectiveuse of all energy in the economy (ie output of all goods andservices) Because EIR is normalized by economic energyintensity it effectively measures the technical change of theenergy sector relative to the technical change of the overalleconomy For fossil fuels EIR is a measure of the net effectof resource depletion plus or minus the effect of technology

I calculate the price-based annual EIR EIRp of the UnitedStates for each major primary fossil fuel as in (4)ndash(6) (seefigure 1) I also calculate the expenditures-based annualEIR EIRe as in (7)ndash(9) The data used for GDP energyconsumption expenditures on energy energy content of fuelsand energy price are obtained from the US Department ofEnergyrsquos Energy Information Administration (EIA) AnnualEnergy Review (EIA 2008) Fossil fuel prices taken from the2008 Annual Energy Review are the US first purchase priceof oil (table 518) the NG wellhead price (table 67) andtotal coal price (table 78) As reported by the EIA I adjustthe energy content of each fuel to account for fluctuationsover time however typical values are 58 MMBtu for eachbarrel (BBL) of oil 103 MMBtu for each thousand cubic feet(Mcf) of natural gas (NG) and 20ndash24 MMBtu per short ton ofcoal As the EIA reports GDP in units of chained 2000 dollars(EIA 2008) I use energy prices and expenditures in year 2000chained US dollars Figure 1 plots the values of EIRp for oilEIRe for petroleum and EIRp and EIRe for NG and coal inthe United States Petroleum includes crude oil and naturalgas liquids used directly or refined into other final consumerproducts such as gasoline and diesel

EIRpoil = EIfp(oil)

EIGDP= Btu$ of oil

BtuGDP of economy

=BtuBBL of oiloil price( $

BBL )

BtuGDP of economy(4)

EIRpNG = EIfp(NG)

EIGDP= Btu$ of natural gas

BtuGDP of economy

=BtuMcf of natural gasnatural gas price( $

Mcf )


EIRpcoal = EIfp(coal)

EIGDP= Btu$ of coal

BtuGDP of economy

=Btuton of coalcoal price( $

ton)


EIRepetro = EIfe(petro)

EIGDP= total petroleum consumption

(Btu)total expenditures on petroleum ($)BtuGDP

of economyminus1 (7)

EIReNG = EIfe(NG)

EIGDP

= total NG consumption (Btu)total expenditures on NG ($)

BtuGDPof economy(8)

EIRecoal = EIfe(coal)

EIGDP=

total coal consumption (Btu)total expenditures on coal ($)

BtuGDP of economy

(9)

Per (4)ndash(9) EIR is an analog of EROI and trends of EIRp

and EIRe indicate the same impacts from EROImdashnamely thatwith all other aspects being equal energy systems with higherEROI and EIR are of more benefit to society The higher EIRbecomes the higher the value of the resource to the overalleconomy The corollary is that low EIR presents a higherburden to economic growth A few major trends appear infigure 1 and a comparison of these trends to those of EROIin section 3 indicates that there is justification in using EIR asan analogous measure to EROI

3


Figure 2 The ratios of EIRpEIRe were considerably lower during the recession of the early 1980s and moving to the latest recession thatstarted in late 2007

It is important to investigate both EIR measures While theprice of energy represents the marginal cost of a particular fuelat some point in the supply chain the total expenditures onenergy represent how much the total economy depends upontotal energy consumption or average cost of refined energyproducts (eg diesel and gasoline) at final purchase locationsOne clear pattern from figure 1 is that EIRe lt EIRp for allfuels This is to be expected because EIRp uses prices at thepoint of production energy hubs or trading points whereasEIRe uses expenditures that include final consumers far fromenergy hubs and production locations Thus they are measuresat different points in the supply chain with EIRe representingthe end of the energy supply chain For example EIRpoil

represents net energy of oil before refinement into gasolinediesel and other products EIRepetro represents net energy afterpetroleum products have been refined and delivered Thusone can view the difference between EIRp and EIRe as thedifference between net energy from energy after productionand energy after delivery and EIRe inherently includes laborcosts factored into delivered prices

Another important pattern emerges from comparing EIRp

to EIRe the lower the measures become the closer they cometo the same value (see figure 2) As the two EIR measuresapproach each other it signals lower profit margins for fossilfuel refining and distribution versus fossil fuel extractionAlthough the definitions of EIR dictate that both approachzero as energy prices and expenditures increase the ratio ofEIRp to EIRe cannot viably be less than one as this wouldindicate hub (or producer) prices are less than prices to finalconsumers Thus the EIRp to EIRe ratio could be an importanteconomic indicator in addition to the nominal values of EIRand EROI The two EIR measures are most similar during theUS recession of the early 1980s as well as during the yearsleading to the recession starting in 2008

21 EIR of oil and petroleum

The EIRpoil typically lies between 10 and 30 but from 1949to 2008 it ranges from 75 (1981) to 48 (1998) with a value of88 in 2008 marking the year of the highest oil price in historyand the beginning of the latest time period of US economicrecession The minimum EIRpoil of 75 in 1981 also coincidedwith the peak of an economic recession in the US as well as thetime of the highest overall cost of petroleum as a percentageof GDP at 85 (EIA 2008) EIRepetro from 1970 to 2006ranged from 53 in 1981 to 159 in 1998 the same years forthe lowest and highest EIRpoil In 1981 EIRpoilEIRepetro was1431 (minimum) and in 1998 3051 (maximum) The EIRpoil

from 1949 to 1972 gradually increased from 19 to 29 with littlevolatility in the value This lack of volatility can possibly beattributed to the Texas Railroad Commission (TRC) acting asan oil cartel by prorationing oil production in Texas from 1935to 1973 to create a price floor for balancing supply and demand(Prindle 1981) With Texas as the swing state oil producer untilUS peak production in 1970 this balancing on the price waspossible

After 1972 the increased oil prices in 1973 caused by theArab oil embargos and again in 1979 impacted by the IranianRevolution forced the EIRpoil to drop (eg lower Btu$ in thenumerator of (1)) After the mid-1980s the EIRpoil followsa general rise and fall with increased volatility and a steadydeclining trend since 1994 (with one anomalously high valuein 1998) Due to the dramatic drop in the price of oil from 2008to 2009 the EIRpoil is higher in 20092

22 EIR of natural gas

The EIRpNG is three to four times higher than EIRpoil from1949 until 1971 but dropped significantly from over 140 in2 EIRpoil sim 14 in 2009 with oil price of $51BBL in 2000 US$ Thecontinuation of EIA data for 2009 was not yet available at the time of thiswriting

4


Figure 3 EIRp and EROI for US oil and natural gas (OampG) The EROIOampG from Cleveland (2005) is shown when considering only directenergy inputs (solid circles) as well as including indirect energy inputs (open circles) The EIRp is shown for oil only (EIRpoil solid blackline) for both oil and gas (EIRpOampG) when weighted according to two methodsmdashthe respective energy consumed from oil and NG (solid grayline) and percentage of GDP spent on petroleum and natural gas (dashed gray line) and for gasoline (EIRpgasoline dashed black line)

1949 to 79 in 1962 The EIRpNG also shows a steep declinefrom 94 in 1971 to 19 in 1982 driven by both a greater than500 increase in the real price of NG as well as economicstagnation in the 1970s Until the late 1970s the FederalPower Commission regulated the NG price at relatively lowvalues The Natural Gas Policy Act of 1978 effectively endingregulation of wellhead NG prices allowed producer pricesto rise and incentivized new production and interstate tradeEIReNG from 1970 to 2006 ranged from a low of 118 in 1983to a high of 31 in 1970 and it was most certainly higher before1970 following the pattern of EIRpNG From the mid-1980sthe EIRpNG began to follow a similar trend as the EIRpoil andeventually came into alignment at nearly the same values afterthe mid-1990s Starting in 2005 the EIRpNG separated fromEIRpoil and this could indicate that unconventional naturalgas resources (eg shale gas) are enabling some decouplingof EIRpNG from that of oil The ratio of EIRpNGEIReNG

has similar values to that for oil except after 1990 this ratiomaintains a lower value (minimum of 124 in 2005) withslightly less volatility

23 EIR of coal

The EIRpcoal shows two periods of increasing and decreasingvalues and the pattern closely follows that of the productionefficiency measure of tons of coal produced per employeehour (EIA 2008) Starting at a value of 40 in 1949 EIRpcoal

rose almost continuously to 75 in 1968 From 1968 to 1975EIRpcoal dropped quickly to 27 before starting a long riseto the range of 110ndash125 at the years around the latest turnof the century In section 3 I compare EIRp EIRe andEROI to discuss how technology shifts and decline of resourcequality explains much of the pre-1977 trends for coal In the

early 1970s appreciable production of sub-bituminous PowderRiver Basin coal began in the Western US and this use of anew coal resource facilitated the rise in the EIRpcoal starting inthe 1970s It took almost a decade more for sub-bituminouscoal to reach annual production of over 100 million short tonsat 121 million short tons in 1979 or 16 of US productionBecause of Western US coal production EIRpcoal begins to risealmost immediately starting in 1975 Since peaking at 128 in2003 EIRpcoal dropped 39 points to 89 in 2008 at nearly thesame rate it rose 39 points from 82 in 1993 to 121 in 1999The EIRecoal smoothly follows the same trend as EIRpcoal andthere is less volatility in the EIRecoal than for either oil or NGThe minimum and maximum EIRecoal were 23 and 85 in 1975and 2003 respectively The ratio of the two EIR measures isalso relatively stable between 12 and 16 but began to dropafter the peak ratio of 158 in 1999 (see figure 2)

3 EIR compared to EROI

In this section I compare EIR to past estimates of EROI foroil and natural gas (EROIOampG) and EROI for coal (EROIcoal)Figure 3 compares EROIOampG to price-based EIR EIRp foroil and natural gas while figure 4 compares EROIOampG toexpenditures-based EIR EIRe for oil and natural gas Foreach year tabulated for oil and natural gas (OampG) I useEROIOampG estimated from Cleveland (2005) as he definedin (10) Cleveland (2005) calculated EROIOampG for thecombined OampG sector and included energy inputs from twobasic categories (1) direct energymdashthe direct consumptionof fuels as well as in final energy carriers (eg electricity)and (2) an estimate of indirect energymdashthe energy requiredto make the materials and infrastructure (eg steel concreteetc) used during OampG operations The energy output includes

5


Figure 4 EIRe and EROI for US oil and natural gas The EROI from Cleveland (2005) is shown when considering only direct energy inputs(solid circles) as well as also indirect energy inputs (open circles) The EIRe is shown for petroleum (EIRepetro solid black line) for naturalgas (EIReNG dashed gray line) and for combined petroleum and natural gas (EIRePampG solid gray line)

the thermal energy of produced oil natural gas and naturalgas liquids (NGL) (Cleveland 2005) Figures 3 and 4show two EROIOampG values for US OampG production Theclosed circles represent EROIOampG when considering only directenergy inputs (inferred from Cleveland (2005)) and the opencircles represent EROIOampG when considering both direct andindirect energy inputs Note that the original calculationsfor EROIOampG only exist for ten of the years (approximatelyevery year ending in lsquo2rsquo and lsquo7rsquo) shown as Cleveland (2005)estimated additional values by interpolation

EROIOampG = Eout

Ein=

(Btu

BBLof oil

)(BBLof oil)

+(

Btu

Mcfof NG

)(Mcf of NG) +

(Btu

BBLof NGL

)

times (BBL of NGL)

Eindirect + Einindirectminus1 (10)

I plot four values of EIRp for comparison in figure 3

EIRpoil oil onlymdashthese are the values calculated from (1)as displayed in figure 1EIRpOampG oil and natural gas weighted by two methodsTo more effectively compare EIRp of OampG to theEROIOampG calculated by Cleveland (2005) I create twocombined EIRpOampG for oil and natural gas as follows

Percentage of GDP spent on each fuel these valuesare the average of EIRpoil and EIRpNG weightedaccording to the total expenditures of US GDP oneach fuel each year (EIA 2008) As an examplein 2006 52 and 14 of US GDP were spent onpurchasing petroleum and NG respectively Thusfor 2006 EIRpOampG = (EIRpoil)(5266) +(EIRpNG)(1466) = (127)(5266) +(212)(1466) = 145

Percentage of energy consumed of each fuel thesevalues are the average of EIRpoil and EIRpNG

weighted according to the total energy consumedfrom each fuel for each year (EIA 2008)

EIRpgasoline leaded and regular unleaded gasolinemdashtheseare the values substituting the price and energy content ofgasoline for oil in (1) The price of leaded gasoline is usedfor 1949ndash1975 and the price of regular unleaded gasolineis used for 1976ndash2008 (EIA 2008)

I plot three values of EIRe for comparison in figure 4

EIRepetro petroleum onlymdashthese are values calculatedfrom (4) as displayed in figure 1EIReNG natural gas onlymdashthese are values calculatedfrom (5) as displayed in figure 1EIRePampG petroleum and natural gasmdashto more effectivelycompare EIRe of OampG to the EROIOampG calculated byCleveland (2005) I create a combined EIRe for petroleum(simoil) and natural gas These data are calculated bydividing the sum of the numerators of (4) and (5) by thesum of the denominators of (4) and (5)

While the two EIRpOampG measures vary substantiallybefore 1980 they mostly converge by the mid-1980s drivenby increased incorporation of NG into the economy as asubstitute for oil (eg for electricity) and deregulation ofNG prices From 1954 to 1972 the EIRpoil measuredapproximately midway between the two EROIOampG measuresas the two EROIOampG values appear to represent approximateupper and lower limits for EIRpoil during the dates for whichboth measures are calculated During this time the TexasRailroad Commission (TRC) was setting oil production limitsand prorationing oil production in Texas Thus it is possiblethat the value of EIRpoil between the EROI indicators isevidence that the TRC was effective at setting the oil price to

6


Figure 5 Energy intensity ratio and EROI (bituminous only per (Hall et al 1986)) for US coal production The EROIcoal from Hall et al(1986) is shown when considering only direct energy inputs (gray solid circles) adding indirect energy inputs (black solid circles) addingtransport energy (black open circles) and adding an energy input for labor (gray open triangles) The EIRpcoal (solid line no markers) andEIRecoal (dashed line no makers) are shown for total US coal consumption

balance supply and demand in a forward-looking mannermdashaslong as US production could easily outpace demand before USpeak oil production in 1970

After 1985 there is little difference between the EIRpOampG

values in figure 3 Additionally beginning in 1998 allEIRp measures for oil and NG dropped quickly through2008 and only the values of the early 1980s are lowerThe EIRpgasoline is expectedly lower than the EIRp measuresfor oil and NG as delivered gasoline is the end of thesupply chain before consumption in consumer vehicles TheEIRpgasoline peaked at 108 in 1998 and had a low of 36in 1980 In 2008 EIRpgasoline = 55 a value surpassedfor all other years since 1985 For statistically comparingEROIOampG to the two EIRpOampG calculations there are onlysix overlapping years (N = 6) of calculations (1972 19771982 1987 1992 and 1997) due to data limitation fromthe US government (Cleveland 2005) However calculatingthe Pearson correlation coefficient shows that there is highcorrelation between EROIOampG including direct and indirectenergy inputs with the EIRpOampG weighted by the percentageof GDP spent on petroleum and NG (r = 093) the EIRpOampG

weighted by the energy consumed of petroleum and NG (r =093) and EIRpoil (r = 084) The first two correlations at r =093 are statistically significant at the p = 0005 level (ie lessthan 05 chance that the values are not correlated) andr = 084 is significant at the p = 0025 level Because bothEIR and EROI are wholly or partly derived from economicrather than pure energy data the correlation test indicates onlythat EROI and EIR capture the same changes in energy andeconomic phenomena rather than one value or the other is morecorrect

As seen in figure 4 EIRepetro and EIRePampG are wellbelow the indirect EROIOampG Because EROIOampG most closelyrepresents net energy at production it should most closely

resemble EIRp rather than EIRe and this is verified in figures 3and 4 Both EIRp and EIRe indicators for oilpetroleum andcombined OampGPampG follow the same trend as EROIOampGIn calculating the correlation coefficient for EROIOampG andEIRePampG I obtain r = 080 significant at the p = 005 levelHowever r = 069 between EROIOampG and EIRepetromdashtoo lowfor significance with N = 6 Due to the correlations betweenEROIOampG and both EIRpOampG and EIRePampG it is very likely thatthe EROIOampG indicator dropped by the same relative amount(40ndash60) as those EIR indicators from 1997 to 2008

In figure 5 I compare EROIcoal to both EIRpcoal andEIRecoal where the various EROIcoal calculations are obtainedfrom Hall et al (1986) who estimated EROIcoal for USbituminous coal from 1929 to 1977 For the six yearswith comparable data EIRpcoal follows the trends of EROIcoal

and lies between the EROIcoal measure that includes onlydirect and indirect energy inputs (solid black circles) andthat which additionally includes transport energy inputs (opencircles) Because over 90 of coal production was bituminousbefore 1973 the EIRpcoal before 1973 effectively representsa measure for bituminous coal comparable to the EROIcoal

presented by Hall et al (1986) The correlation coefficientsfrom comparing the six overlapping years of data for EROIcoal

and EIRpcoal are 089 096 099 for the EROIcoal measuresincluding only direct and indirect energy inputs additionallyincluding transport energy and additionally including laborenergy respectively The first coefficient is statisticallysignificant to the p = 001 level and the last two at thep = 0005 level showing a very high confidence in correlationThere are not enough overlapping data points to effectivelycompare EIRecoal with EROIcoal but it should match best withthe lowest EROIcoal that accounts for labor inputs to the pointof delivery to power plants and industrial facilities

7


Figure 6 The EIRpelec of industrial and residential electricity rose steadily from 1960 to 2005 after which both began declining For quickcomparison of EIRpelec to electricity generated using NG or coal the EIRpNG and EIRpcoal are multiplied by a power plant conversionefficiency

For EROIcoal including all energy inputs Hall et al (1986)attribute the relatively constant value from 1929 to 1954 to atime of constant mining technology and little to no explorationDuring the 1950s and 1960s the substantial introduction ofmechanized mining increased indirect costs but decreasedlabor costs more substantially However declining resourcequality and increased energy inputs embodied in machinerymost contribute to the EROIcoal decline from 1969 to 1977(Hall et al 1986)

The price used to calculate EIRpcoal from table 78 of EIA(2008) is the free-on-board (FOB) or undelivered averageprice of coal Today the difference between FOB and deliveredcoal price varies substantially across the US and future workshould estimate EROIcoal after 1977 to reveal if EIRpcoal

continues to correlate well with EROIcoal Nonetheless just aswith oil and gas EIRpcoal follows the same trends as EROIcoal

providing a quick easy and useful proxy measure of netenergy

4 EIR of electricity

With section 3 showing that EIR provides an accurate proxymeasure for EROI for OampG and coal I use EIR as an estimatefor the overall system that produces and delivers electricitya secondary energy carrier This system inherently includesfuel production power plant conversion electricity distributionand transmission and retail sales (for residential electricity) Icalculated the EIRp of electricity (EIRpelec) just as done for theprimary fuels as shown in (11) Because (11) is based uponconsumer sales price rather than expenditures the equationcalculates EIRpelec Thus EIRpelec represents net energy ofelectricity delivered to the consumer

Figure 6 displays the results using both US residentialand industrial electricity prices Additionally because NG andcoal are commonly burned to generate electricity I compare

EIRpelec to the EIRpcoal and EIRpNG multiplied by a standardconversion efficiency of a coal and natural gas combinedcycle (NGCC) power plant respectively This qualitativecomparison of presents only a first-order look at how toenvision the supply chain of fuel to electricity and futurework can focus on more rigorous comparison The conversionefficiency of a coal plant is taken from Ayres and Warr (2005)until 2000 and assumed at 34 after 2000 The conversionefficiency for a NGCC is assumed at 40 a typical valuefor NGCC power plants operating on the grid even thoughNGCC plants can operate at higher efficiencies MultiplyingEIRpcoal and EIRpNG by a conversion efficiency provides acomparison to the full EIRpelec EIRpelec inherently includesall costs associated with selling electricity whereas the valuesobtained by multiplying EIRpcoal and EIRpNG by conversionefficiencies should be larger in that they do not include thecapital and operating costs of converting distributing andselling of electricity

EIRpelec = EIfp(elec)

EIGDP= Btu$ of electricity

Btu$ of economy

=3410 Btu

kWh of electricityelectricity price( $kWh )

Btu$ of economy (11)

Because the industrial electricity price is lower than theresidential price its EIRpelec is always greater Industrialfacilities use higher voltages and thus have less transmissionand distribution costs From 1960 to 2008 the EIRpelec

of residential and industrial electricity rose from 15 to 43(peaking at 45 in 2005) and 36 to 70 (peaking at 76in 2004) respectively These trends imply that over thelast 50 years investments in electricity infrastructure havereturned increasingly more energy per that invested The moresignificant downturn of the industrial EIRpelec from 50 in1971 to 30 in 1982 and back to 50 by 1991shows the more

8


heavy reliance of industrial electricity on oil and NG thanresidential electricity

The last 10 years of EIRpelec data present particularlyinteresting information The industrial EIRpelec in 1998 at avalue of 70 is the same as in 2008 Furthermore the 2008EIRpNG multiplied by an assumed power conversion efficiencyof 40 is at the same value as industrial EIRpelec for that yearThis comparison shows that NGCC-powered electricity mayhave difficulty continuing the trend of increasing industrialEIRpelec However my first-order comparison does not includethe energy value of industrial facilities using excess heat incombined heat and power (CHP) applications For a CHPcomparison I could use a higher energy conversion efficiencybut a full analysis is beyond the scope of the present work

5 Conclusion

I have defined the measure of energy intensity ratio as a proxymeasure for energy return on energy invested that is easilycalculated for a country by using energy price fuel energycontent total energy expenditures total energy consumptionand energy intensity of the overall economy The calculatedEIR measures have high correlation with existing calculationsfor EROI of US oil and gas as well as US coal Thus thehypothesis of this letter is true prices of energy resourcesscaled by the energy intensity of the overall economy dolargely reflect their EROI (or at least existing measures ofEROI) This is not too surprising given that the indirect energyinput estimates for EROI involve the use of financial costinformation that is scaled by energy intensity Additionallyan important conclusion of the present work is that by usingdifferent EIR measures one obtains net energy informationat different points in the energy supply chain (eg at oilproduction at gasoline sales as delivered electricity) toprovide insight into the energy requirements for the overallenergy system rather than a single technology or resource

In the post-World War II era the EIR and EROI of theUS oil and gas industry and coal production have risen andfallen for two cycles The last decade corresponds to thelatest downward cycle for all three fossil fuels This begsthe question as to how long this trend could have continuedwithout significant structural changes to the economy Indeedrecent studies suggest that the most recent oil price shockof 2007ndash2008 played no small part in the current economicdownturn (Hamilton 2009) Because the US has had economicdownturns (1970s to early 1980s) characterized by highpercentages (gt10) of expenditures going to direct purchaseof energy it is possible that EIR and EROI can be forward-looking measures of the onset of economic difficulties causedby energy price rises That is to say EIR and EROIcould represent bounding constraints on the percentage ofenergy expenditures that can occur without inducing economicrecession Because energy infrastructure changes slowly(eg power plants operate for over 40 years) investments madetoday affect energy prices several decades into the future andEROI and EIR may present sound bases for projecting futureenergy production scenarios

The EIR calculations of this letter also shed light into thenature of energy efficiency in the US The economic energyintensity is often used as one measure of economy-wide energyefficiency By calculating EIR in a manner that is normalizedby economic energy intensity we are able to track how wellenergy is produced relative to technological change Forexample in 1972 EIRpgasoline was 59 and in 2008 EIRpgasoline

was 55 But during this time period the US average car fuelefficiency changed from 0073 (137 mpg) to 0044 (226 mpg)gallons of gasoline per mile traveledmdashan increase in efficiencyof 39 (Davis et al 2010) Thus even though there wassignificant improvement in car fuel efficiency the net energycontribution of gasoline to economy was essentially the samein 2008 as three and a half decades earlier Technologyadvancement and economic restructuring have only allowedthe US economy to tread water with respect to net energy forpetroleum (Charles 2009) Efficiency investment thus far hasnot significantly eliminated the need for fuels with high netenergy

In this letter I analyzed data describing only fossil fuelsand aggregate electricity But in the long term the developmentof renewable energy technologies is a race to install them withthe high EROI of past and current fossil energy resourcesbefore fossil resources are depleted to lower EROI It is alsolikely insufficient to have energy resources with EROI justgreater than unity and researchers to date have given very littleattention to the minimum EROI that may be required for amodern complex society (Hall et al 2009 Tainter et al 2003)For example debates about whether or not corn-based ethanolhas EROI gt 1 (Farrell et al 2006 Patzek and Pimentel 2005Pimentel 2003) rarely discuss how or when it is supposed tocompete with petroleum and gasoline characterized by EROIand EIR many multiples higher

It is important to guide future research to understand themeaning of crossover values of EIR and EROI from renewableand fossil alternatives as the use of more land for capturingrenewable energy flows has a similar negative effect on long-run economic growth as depletion of fossil resources (Jones2002) Thus a need exists to calculate the trends of EROIand EIR for renewable energy technologies starting in thelab and continuing through commercialization These earlyassessments will teach us better how to measure the paceof innovation in energy technologies However the lack ofspecific renewable energy prices or sector energy input datapresents a difficulty for long term tracking Future researchshould be directed at deriving methods and data for effectivelycomparing EROI of fossil and renewable technologies onequal footing and over time In this way we can measure theinnovation or lack thereof of both fossil and renewable energysystems

References

Ayres R U 2008 Sustainability economics where do we stand EcolEconom 67 281ndash310

Ayres R U and Warr B 2005 Accounting for growth the role ofphysical work Struct Change Econom Dyn 16 181ndash209

Charles D 2009 Leaping the efficiency gap Science 325 804ndash11

9


Cleveland C J 2005 Net energy from the extraction of oil and gas inthe United States Energy 30 769ndash82

Cleveland C J Costanza R Hall C A S and Kaufman R K 1984Energy and the US economy a biophysical perspective Science225 8

Cleveland C J Kaufman R K and Stern D I 2000 Aggregation andthe role of energy in the economy Ecol Econom 32 301ndash17

Costanza R and Herendeen R A 1984 Embodied energy andeconomic value in the United States economy 1963 1967 and1972 Resources Energy 6 129ndash63

Davis S C Diegel S W and Boundy R G 2010 Transportation EnergyData Book 29th edn Oak Ridge National LaboratoryORNL-6985

EIA 2008 Annual Energy Review DOEEIA-0384Farrell A E Plevin R J Turner B T Jones A D OrsquoHare M and

Kammen D M 2006 Ethanol can contribute to energy andenvironmental goals Science 311 506ndash8

Georgescu-Roegen N 1971 The Entropy Law and the EconomicProcess (Cambridge MA Harvard University Press)

Hall C A S Balogh S and Murphy D J R 2009 What is the minimumEROI that a sustainable society must have Energies 2 25ndash47

Hall C A S Cleveland C J and Kaufman R K 1986 Energy andResource Quality the Ecology of the Economic Process(New York Wiley)

Hall C A S Cleveland C J and Mithell B 1981 Yield per effort as afunction of time and effort for United States petroleum uraniumand coal Energy and Ecological Modelling Symp of the IntSoc for Ecological Modeling ed W J MitschR W Bosserman and J M Klopatek (Louisville KY ElsevierScientific)

Hall C A S Powers R and Schoenberg W 2008 Peak oil EROIinvestments and the economy in an uncertain future BiofuelsSolar and Wind as Renewable Energy Systems Benefits andRisks ed D Pimentel (Berlin Springer)

Hamilton J 2009 Causes and consequences of the oil shock of2007ndash08 Brookings Papers on Economic Activityed D Romer and J Wolfers

Jones C I 2002 Introduction to Economic Growth (New YorkW W Norton)

Kaufmann R K 1994 The relation between marginal product andprice in US energy markets implications for climate changepolicy Energy Econom 16 145ndash58

Odum H T 1996 Environmental Accounting Energy andEnvironmental Decision Making (New York Wiley)

Patzek T W and Pimentel D 2005 Thermodynamics of energyproduction from biomass Crit Rev Plant Sci 24 327ndash64

Pimentel D 2003 Ethanol fuels energy balance economics andenvironmental impacts are negative Nat Resources Res12 127ndash34

Prindle D F 1981 Petroleum Politics and the Texas RailroadCommission (Austin TX University of Texas Press)

Soddy F 1926 Wealth Virtual Wealth and Debt The Solution of theEconomic Paradox (London Allen and Unwin)

Tainter J 1988 The Collapse of Complex Societies (CambridgeCambridge University Press)

Tainter J A Allen T F H Little A and Hoekstra T W 2003 Resourcetransitions and energy gain contexts of organization ConservEcol 7 4

USDOE 2010 Energy intensity indicators in the US accessed on23 August 2010 at www1eereenergygovbapbaintensityindicatorsindexhtml

10

1 Introduction

2 Definition and calculation of energy intensity ratio (EIR)



23 EIR of coal



5 Conclusion

References

IOP PUBLISHING ENVIRONMENTAL RESEARCH LETTERS

Environ Res Lett 5 (2010) 044006 (10pp) doi1010881748-932654044006

Energy intensity ratios as net energymeasures of United States energyproduction and expendituresC W King

Center for International Energy and Environmental Policy The University of Texas at Austin1 University Station C1100 Austin TX 78712-0254 USA

E-mail careykingmailutexasedu

Received 22 July 2010Accepted for publication 14 October 2010Published 10 November 2010Online at stacksioporgERL5044006

AbstractIn this letter I compare two measures of energy quality energy return on energy invested(EROI) and energy intensity ratio (EIR) for the fossil fuel consumption and production of theUnited States All other characteristics being equal a fuel or energy system with a higher EROIor EIR is of better quality because more energy is provided to society I define and calculate theEIR for oil natural gas coal and electricity as measures of the energy intensity (units of energydivided by money) of the energy resource relative to the energy intensity of the overalleconomy EIR measures based upon various unit prices for energy (eg $Btu of a barrel of oil)as well as total expenditures on energy supplies (eg total dollars spent on petroleum) indicatenet energy at different points in the supply chain of the overall energy system The resultsindicate that EIR is an easily calculated and effective proxy for EROI for US oil gas coal andelectricity The EIR correlates well with previous EROI calculations but adds additionalinformation on energy resource quality within the supply chain Furthermore the EIR andEROI of oil and gas as well as coal were all in decline for two time periods within the last40 years and both time periods preceded economic recessions

Keywords energy net energy energy return on energy invested energy intensity energyeconomics

S Online supplementary data available from stacksioporgERL5044006mmedia

1 Introduction

Since the oil crises of the 1970s so heavily affected economicoutput in the industrialized world various researchers haveconfirmed the dependence of the modern economy on theenvironment energy and sometimes more precisely energy orexergy services (Ayres 2008 Ayres and Warr 2005 Clevelandet al 1984 2000 Costanza and Herendeen 1984 Georgescu-Roegen 1971 Kaufmann 1994 Odum 1996 Soddy 1926)Part of this pursuit revealed an understanding of not only thequantity of energy resources produced over time but also thequality Quality is measured in many ways (eg energy densitycleanliness etc) but one key measure of the systemic qualityof energy resources and systems is the energy return on energy

invested (EROI) That is to say with all other characteristicsof two energy systems technologies or resources being equalthe one with higher EROI will have a higher value to societythan the other Societies and natural systems also organizethemselves differently depending upon the EROI of theirresources (Tainter 1988 Tainter et al 2003)

For fossil energy resources analysts usually calculateEROI at the mine mouth as the energy content of the producedresource (eg oil) divided by the sum of energy inputs requiredto extract the resource (Hall et al 1986 1981) Energy priceand the total expense of purchasing end-use forms of energyalso act as system-wide economic indicators describing therole of energy in the broader economy Because energy is aninelastic good and increased energy prices are passed along to

1748-932610044006+10$3000 copy 2010 IOP Publishing Ltd Printed in the UK1












EIfp = Btuunit









2





EIRpoil = EIfp(oil)

EIGDP= Btu$ of oil

BtuGDP of economy


BBL )


EIRpNG = EIfp(NG)


BtuGDP of economy


Mcf )



EIGDP= Btu$ of coal

BtuGDP of economy


ton)






EIReNG = EIfe(NG)

EIGDP


BtuGDPof economy(8)


EIGDP=


BtuGDP of economy

(9)



3













4





23 EIR of coal






5




EROIOampG = Eout

Ein=

(Btu

BBLof oil

)(BBLof oil)

+(

Btu

Mcfof NG

)(Mcf of NG) +

(Btu

BBLof NGL

)

times (BBL of NGL)











6













7













Btu$ of economy

=3410 Btu





8




5 Conclusion







References




9

























10

1 Introduction




23 EIR of coal



5 Conclusion

References












EIfp = Btuunit









2





EIRpoil = EIfp(oil)

EIGDP= Btu$ of oil

BtuGDP of economy


BBL )


EIRpNG = EIfp(NG)


BtuGDP of economy


Mcf )



EIGDP= Btu$ of coal

BtuGDP of economy


ton)






EIReNG = EIfe(NG)

EIGDP


BtuGDPof economy(8)


EIGDP=


BtuGDP of economy

(9)



3













4





23 EIR of coal






5




EROIOampG = Eout

Ein=

(Btu

BBLof oil

)(BBLof oil)

+(

Btu

Mcfof NG

)(Mcf of NG) +

(Btu

BBLof NGL

)

times (BBL of NGL)











6













7













Btu$ of economy

=3410 Btu





8




5 Conclusion







References




9

























10

1 Introduction




23 EIR of coal



5 Conclusion

References





EIRpoil = EIfp(oil)

EIGDP= Btu$ of oil

BtuGDP of economy


BBL )


EIRpNG = EIfp(NG)


BtuGDP of economy


Mcf )



EIGDP= Btu$ of coal

BtuGDP of economy


ton)






EIReNG = EIfe(NG)

EIGDP


BtuGDPof economy(8)


EIGDP=


BtuGDP of economy

(9)



3













4





23 EIR of coal






5




EROIOampG = Eout

Ein=

(Btu

BBLof oil

)(BBLof oil)

+(

Btu

Mcfof NG

)(Mcf of NG) +

(Btu

BBLof NGL

)

times (BBL of NGL)











6













7













Btu$ of economy

=3410 Btu





8




5 Conclusion







References




9

























10

1 Introduction




23 EIR of coal



5 Conclusion

References













4





23 EIR of coal






5




EROIOampG = Eout

Ein=

(Btu

BBLof oil

)(BBLof oil)

+(

Btu

Mcfof NG

)(Mcf of NG) +

(Btu

BBLof NGL

)

times (BBL of NGL)











6













7













Btu$ of economy

=3410 Btu





8




5 Conclusion







References




9

























10

1 Introduction




23 EIR of coal



5 Conclusion

References





23 EIR of coal






5




EROIOampG = Eout

Ein=

(Btu

BBLof oil

)(BBLof oil)

+(

Btu

Mcfof NG

)(Mcf of NG) +

(Btu

BBLof NGL

)

times (BBL of NGL)











6













7













Btu$ of economy

=3410 Btu





8




5 Conclusion







References




9

























10

1 Introduction




23 EIR of coal



5 Conclusion

References




EROIOampG = Eout

Ein=

(Btu

BBLof oil

)(BBLof oil)

+(

Btu

Mcfof NG

)(Mcf of NG) +

(Btu

BBLof NGL

)

times (BBL of NGL)











6













7













Btu$ of economy

=3410 Btu





8




5 Conclusion







References




9

























10

1 Introduction




23 EIR of coal



5 Conclusion

References













7













Btu$ of economy

=3410 Btu





8




5 Conclusion







References




9

























10

1 Introduction




23 EIR of coal



5 Conclusion

References













Btu$ of economy

=3410 Btu





8




5 Conclusion







References




9

























10

1 Introduction




23 EIR of coal



5 Conclusion

References




5 Conclusion







References




9

























10

1 Introduction




23 EIR of coal



5 Conclusion

References

























10

1 Introduction




23 EIR of coal



5 Conclusion

References

energy intensity ratios as net energy measures of united states

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