Well put!
I had exactly this same argument with someone at a political blog site recently, who was arguing that one could only use fuels which released more energy than than it took to create them. Economics is irrelevant, he argued, just net energy.
Bollocks!
I suspect that there is a pretty whopping net energy loss going from say, water to tanks of LH2 and LOX, but to get that sort of energy density, it's more than worth losing tons of energy in the production process, since we find it worth it to be able to put things in orbit.
Ditto, even energy-losing production of general transportation fuels could be worth it, if your primary energy source is cheap and you value having high density, easily storable fuels.