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are examples of provident technology which created great new reserves,
and these reserves subsequently have been further extended by economic
improvements in mining and processing methods.
Concurrent decreases in
energy costs played no small part in keeping production and processing
costs down as the grade of ore decreased.
In recent years, however, the real costs (in constant monetary units)
of producing metallic aluminum and copper have started to rise, partly because of increases in energy costs, but largely because limits on the
efficiency of extraction and processing are being reached and no new technologic breakthrough has occurred. Consequently, further decreases
in the work expended per unit of metal produced have not been possible
and net work profit, after decades of increase, is starting to decline.
For most mineral commodities, technology appears no longer able to keep
ahead of increasingly adverse geologic parameters. On the other hand,
because the known deposits of aluminum, iron, and copper ore are large,
and many have gradational boundaries, real costs of these metals can be
expected to advance slowly rather than swiftly as would be the case with
materials with less abundant reserves (in relation to demand) and whose
deposits have sharp boundaries.
An example of the latter is natural gas, where demand already has
outrun the supplies available at costs near those of recent record.
fact, it is the natural gas situation that seems to offer the most
persuasive argument against the utility of the economic approach to
estimation of the availability of a nonrenewable resource.
It is highly
improbable that complete abandonment of price controls on natural gas in
the United States, or even the creation of price supports for domestic
production at a level five times the recent controlled wellhead price,
would result in domestic production sufficient to close the "unsatisfied
demand" gap shown on the U.S. gas supply-demand projections (Fig. 15) published recently by the Federal Power Commission.
There may well be sufficient gas "in place" to satisfy the projected demand, but the exponential imperative that skyrockets production costs
with increasing depth and with increasing "tightness" of reservoir rocks
puts a very real limit on the amount producible at prices which could be justified by most uses of the fuel. Natural-gas reserves in the United
States are running out, and estimates of demand based on untenable
assumptions of availability, as well as optimistic estimates of gas-in
place, are of relatively little use in planning for the conversion to
other fuels that must now take place. Stimulation of domestic production
and imports of liquefied natural gas can only buy, at substantial expanse,
the time required for such conversions.
The geologic-analogy method of calculating potential resources,
although it implicitly recognizes physical limits as the overriding
control on ultimate recovery, is based on three assumptions that are
debatable if not downright untenable.
The first is that oil exists in
unexplored basins and other areas in the same ratio to the volume
host rocks as it has been found to exist in the basins and areas of
production. Very few sedimentary basins are unexplored simply because no
one has thought to go there or because it was impossible to get there and carry out exploration; only basins covered by deep water, thick alluvium or an ice cap fit this criterion. All other basins are unexplored at
least in part because of lack of evidence of oil being there. Only if
UNITED STATES GAS SUPPLY - DEMAND BALANCE
(Contiguous 48 States)
*US natural gos reserve additions (1971-1990) total 325 trillion cubic feet.
Token from Figure 1, page 3, "National Gos Supply and Demond , 1971 - 1990, Federal Power Comission, 1972
exploration and development over the past hundred years had progressed outward as a wave front from one or more points chosen at random within each continent would this first assumption of the geologic-analogy method
The second debatable or untenable assumption is implicit in the
method, and it is that the price of oil will increase to meet the greater
costs of producing oil from deeper horizons, from more hostile environ
ments, and from reservoirs more distant from the centers of use.
A third questionable assumption implicit in the geologic-analogy
method is that the sum of all technological and political impacts on
reserves during the period of use of the potential reserves will not be
As a matter of logic, a technologic breakthrough in substitution
technology (in the production of synthetic crude oil, for example) would
have a strongly negative effect on petroleum reserves; indeed, the moment
it costs more to find and produce a barrel of "new" petroleum than it
does to produce a barrel of synthetic crude from coal, oil shale, or tar
sands, there will be no more "notential" petroleum reserves and the question
of how much petroleum remains to be found will be of no further importance.
Political decisions to extend the geographic areas in which petroleum
exploration and production are prohibited would also have a negative impact
on potential reserves.
The geologic-analogy method has led to two practices which deserve
One is misleading and unjustifiable; the other is simnly mis
The first is the practice of adding together subjective estimates
of differina magnitudes and ranges of uncertainty to produce a single estimate of "notential reserves". As noted previously in this paper,
such practice is logically unsupportable; more importantly, as Hubbert
has nointed out (1971, p.10), "it is possible that governmental and
industrial policies based on such estimates could within a matter of
decades prove to have been seriously misguided."
The second practice that can mislead the unwary involves the use
of oil-in-place estimates, modified or unmodified by ultimate-recovery
The National Petroleum Council's 1971 estimate for total oil
in-place discoverable (in the U.S.) of 727.4 billion barrels appeared
very reassuring if one made the mistake of comparing it with the "oil
produced" total of about 90 billion, or with the 1971 domestic production
of 3.5 billion. Only when one noted in the NPC estimates that there was
less oil-in-place remaining to be discovered (332.0 billion barrels) than
had already been discovered (395.5 billion barrels) and when one calculated a 30.4 percent cumulative recovery efficiency from the NPC estimate of
the oil that will ultimately be recovered from the found portion, did one
begin to realize that the NPC estimate was much more conservative than it
appeared at first glance. In fact, application of the NPC estimate of 37 percent cumulative recovery efficiency (to be attained in 1985) to the
total estimate of oil-in-place discoverable and addition of the result to
the NPC estimate of total oil to be recovered from already-found oil,
results in a figure of 242.5 billion barrels for ultimately recoverable
U.S. petroleum, far below the estimate of the same year by the American
Association of Petroleum Geologists of 432 billion barrels (based on the
wildly optimistic assumption of 60 percent ultimate recovery of discovered oil-in-place) and only 27.6 percent above Dr. Hubbert's estimate of 190 million barrels, which had been called unrealistically pessimistic by
many in the oil industry.