I think you're confused. We do not create fossil fuels, we extract them. It does not take more energy to extract and process them than they provide upon combustion. The fact that such fuels provide more energy than they require for extraction and processing does not violate any law of thermodynamics.
Freeing up hydrogen is a much more energy-intense process to date. It currently requires more energy to free-up hydrogen than that hydrogen ends up providing in an automobile. Even if that ceases to be the case, no law of thermodynamics would be violated. Your misconception of fuels necessarilly costing more to produce than they provide for use comes from your misuse of the word create. If we had to truly create the petroleum or the water, you'd be right. And if we were "cracking water" and using the hydrogen to turn around and power a machine that combined hydrogen and oxygen to make water, then we would certainly be using more energy than it provided us for fuel.
And there are other problems involved in using hydrogen besides the processing issues. I'm not opposed to funding the research of alternative energy sources, but I think everyone's getting tired of hearing promises that no one can guarantee will be fulfilled. Pardon the pun, but they're just blowing smoke.
I agree. What is standing in the way of success is the lack of effort. It ticks me off when people say that we won't have cheap practical fuel cell or cheap photovotaics or small scale fusion or what have you until some arbitrary number of years have passed. Do these people think that the mere passage of time makes things happen?
It's all a function of human creativity and effort. That human effort can be compresses into a very short time like the Apollo program or the Manhatten Project. There just has to be vision, commitment and good management.
Once you get your home electrolysis system online making hydrogen fuel for your anti OPEC SUV, you'll enjoy another spin off benefit. You fuel cost will be offset somewhat by the fact that water electrolysis produces high purity, medical grade oxygen as a byproduct along with the hydrogen.
The engineer in me would love to have a hydrogen fueled Hybrid Hummer to tool around in.
Of course the most practical source for hydrogen is cracking fossil fuels.