Most of us are familiar with ROI , or return on investment.
A similar concept, physical rather than fiscal, gets almost no column inches but has the potential to turn everything we take for granted on its ear. It is EROEI - energy return on energy invested.
Put simply, if it takes a barrel of oil to pump, process and proffer a barrel of oil (an EROEI of 1:1), then regardless of whether the price per barrel is $5 or $5000, the exercise is pointless.
When Colonel Drake brought his first Titusville well into production in 1859, the EROEI was perhaps 1,000,000:1. Spindletop, famous first gusher, started similarly in 1901.
When the biggest field of them all - Ghawar in Saudi Arabia - was in its prime, it may have rated 100:1.
Those days, and those energy-profit cherry-pickings, are long behind us.
Currently, best estimates are that EROEI (global average), is down to around 15:1.
Why? Because all oilfields produce most economically, and most bountifully, at the beginning of their lives.
Thereafter, the tale is of dwindling supply, accompanied by ever-increasing net-energy losses in the production process.
In the case of Ghawar, for instance, this includes pumping more sea water in, than there are barrels of oil extracted.
It includes repositioning wells (as oil is water-flushed both upwards and inwards) and re-separation of the water from the oil.
It even includes the energy required to combat the corrosion which salt water inevitably brings.
Eventually - inevitably - there ceases to be a net energy gain, and the field is closed.
There may be 30% or more of the oil still in the ground at that point, but - and this is where economists get it wrong - no increase in demand will ever make it worthwhile to extract.
The process simply requires more energy than it can return.
Energy watchers have long acknowledged that M. King Hubbert's classic bell curve is a proven tool in ascertaining when the production of a finite resource will peak.
First publicly advanced in 1956, it proved deadly accurate in predicting that US oil production would peak in 1970 (it did) and would decline forever thereafter (it has).
In volume terms, Dr Hubbert's peak coincides with being half-empty, but EROEI increasingly applies to the reserves in that second half.
Human and business nature being what it is, we cherry-picked the best, first.
In the case of oil, the volumetric half now remaining is deeper, less pressurised, less concentrated, further offshore, more sulphurous, heavier.
In a nutshell, there may be half the resource there, but there won't be half the energy available - far from it.
That little scenario will be playing out in the face of exponential demand growth, a compound divergence.
Further, while not strictly an energy return issue, there is the question of net export volumes.
Oil-exporting countries are all increasing their internal consumption, while being at or beyond their individual production peaks - Indonesia being a classic local example.
Very quickly, these countries go from being net exporters, to net importers, in what we've already established is a sinking-lid game.
Compound compound divergence, as it were. The same folk (people like energy investment banker Matt Simmons and oil analysis expert Jeffery Brown) who research production and export figures, put the bottom-line EROEI for maintenance of our modern society at 8:1. This means that corn-to-ethanol (2:1 at best) won't do it.
Carbon sequestration from lignite, while currently only existing in laboratory form, looks like being a 2:1 energy operation likewise.
Two tonnes burned, one of which does nothing but extract and inject the CO2 from both, give you one tonne as energy - meaning you halve any quantitative estimates of the in-ground resource.
Bear in mind, a tonne of lignite is worth nowhere near a tonne of oil in energy terms to start with, besides having an inconvenient tendency to clog your injectors in its raw form.
To refine it as a synthetic liquid fuel is a well-understood technology, but of course takes energy investment, reducing your net return.
Becomes a little thought-provoking, doesn't it? There are energy sources with even less EROEI, though: oil shale/oil sands are said to take two barrels of oil to make three, leaving little room for inefficiencies, and hydrogen production is the worst of the lot - a net loss, in that it takes more energy to produce than it returns.
Hydrogen is a vector (think of it as a car battery), which is why you will never find a person who understands EROEI extolling the virtues of the hydrogen economy.
It can only result, as Mr McCawber so aptly put it, in misery. What can we expect from here on? Energy Minister Gerry Brownlee recently stated (rightly) that "we are facing a global energy crisis".
Digging into another finite fossil fuel source (like lignite) is only a stopgap answer.
Nuclear energy? No - in its current form, it is a finite resource too, and conforms to both the Hubbert Curve and to EROEI, as well as to predictable demand competition.
The simple truth is that with all mined substances, we find those deeper/sparser/less quality issues coming into play - and less return on either form of investment.
Getting to a permanent energy source is, by definition, the only permanent solution, and it has to be achieved while the oil-lubricated capability still exists.
Given that all stored fossil fuels were the result of sunlight, the answer is a no-brainer.
Sooner rather than later, we will be in solar mode (wind and hydro are merely secondary solar) and efficiencies will play a major part in that transition.
It is not as hopeless a task as it may seem - one kilowatt of sunlight lands on every square metre, so 10sq m of roof would power the average house.
A bonus would be (and already is, for off-gridders like me) not being beholden to power companies.
If growth-requiring fiscal systems out-survive peak energy (ask yourself whether economic activity is work, and whether you can grow work without growing energy), those are the places to invest, as will be the sunny side of the street.
Embedded energy - the energy already expended constructing a building for instance - must also become more valued, given that it represents a second-hand store of a becoming-scarce resource.
It has the long-term potential to impact real estate values in a manner far outweighing a capital gains tax, but then, the whole energy question has the capacity to impact every activity overwhelmingly.
One thing I can guarantee: there will be little unemployment.
If we take average first-world energy use as being the equivalent of having 1000 slaves apiece, we can confidently expect to be much busier little bees.
- Murray Grimwood is co-chair of Solar Action, a renewable-resource advocacy group. He lives at Waitati.
