The point is, your return on energy can be less than 1 (you're using more energy to produce the oil than the oil provides), and the operation can *still* be profitable. And this is without subsidies.

The profit results because gasoline is portable, and electricity isn't. If we all had infinitely long extension cords for our cars, or affordable + durable + compact batteries, this wouldn't make sense.

But batteries are currently so expensive that it's still cheaper to use gasoline, even if RoEI

For several reasons its production will never exceed 3m barrels per day.

The story in Venezuela is similar.

Schlumberger say that oil flows from existing fields will decline by 24m barrels per day by 2010. It is not clear from where this decline will be replaced. Some will be replaced of course, but there is a real danger of shortfall.

The IEA has done the same sums and is alarmed. That was the point of the report they issued this week.

It is time to to do something, that is for sure. Panic would be understandable, but wouldn't help. Our pathetic excuse for a government hasn't even recognized that there is a problem let alone worked out what to do.

One important point you didn't touch on was ERoEI (Energy Returned on Energy Invested). Simply stated, it takes oil energy to find, extract, transport and refine oil. In the early days of Texas oil all one had to do was introduce a drill bit to an easily accessible oil field and whoosh! out came the oil - often in a 'gusher'. The returns in those instances might be as much as 100:1, i.e. for every barrel of oil energy spent searching you got 100 barrels out.

Nowadays in the North Sea the ERoEI is estimated at more like 15:1 - so still quite positive but not as nice as the good old days. With resources such as Athabasca tar sands in Canada the ERoEI was actually negative for a long time. So in addition to the phenomenal economic and environmental expense it was actually spending more oil than it was producing. This has apparently been turned around now but is still not better than 2:1 from all accounts.

Biofuels and hydrogen are generally calculated to be net energy losers - it takes more oil energy inputs in the whole process than the energy that is produced. Only government subsidies make it all profitable.

So in summary, once you have reached a point where your ERoEI is approaching 1:1 no matter what the price of oil is, you might as well sit around on your hands as spend your time and effort searching, drilling and producing the resource. Of course with government subsidies etc. it could still be profitable, however, to continue producing after that point will actually be using up the oil faster. Witness the major oil companies acquiring smaller companies and buying back their own shares whilst winding back exploration. They understand ERoEI and the impact on their profits when it falls.