10. Probable or indicated reserves represent material that can be extracted at a profit under existing economic conditions and with available technology, and which has been calculated by extrapolation based on geologic information and judgment, outward from drill holes or other openings that have penetrated commercial concentrations of the material. There is, in other words, substantial evidence that these reserves exist, but the calculated quantities are subject to considerably greater uncertainty than those for proved reserves. Possible or inferred reserves represent material that could be extracted at a profit under existing economic conditions and with available technology, which may lie beyond the boundaries of the reasonable projection of probable reserves in areas of established production. Speculative reserves are of two kinds: geologic, representing material of a grade that could be extracted at a profit under existing economic conditions and with available technology, which may exist in areas of no present production and little geologic information, and economic, representing calculations based on assumptions of higher prices or cheaper extractive technology, or both, but involving known concentrations of material too lean, too far from market, or in reservoirs too refractory to allow economic exploitation under existing economic and technologic conditions. This speculative category allows wide latitude for geologic, economic and technologic judgment. Of the three reserve categories it represents by far the least certainty. When geologic inference and technological forecasts are combined optimistically, very large "reserve" figures may be promulgated. Potential reserves include all categories of reserves except proved. The term is logical but has led to the unfortunate practice 11. of adding together estimates of possible, probable, and speculative Because these categories represent greatly differing ranges reserves. of uncertainty, they must stand separately. Adding them together is a little like adding numbers of apples, oranges, and hogs; the resulting number is essentially meaningless and unusable. In planning, the categories of potential reserves need to be treated separately, with the uncertainty factors sedulously evaluated. Depletion is the diminution by extraction of the ultimately recoverable valuable material in a mineral deposit, or in an oil or gas field. In a numerical sense, depletion equals production, but the term means more than that; it relates production to the total ore, oil, or gas that will be produced; if that latter figure could be known during production, depletion could be expressed as a percentage of the total, rather than in current production figures. Exhaustion is the point reached when all proved reserves have been extracted. Exhaustion is the end point of depletion. It is retarded by additions to reserves and hastened by production. Secondary recovery is the process of salvaging scrap and obtaining from it a mineral commodity, generally metallic, essentially identical to that produced by plants operating on mine products. The primary demand for a metal is that portion of the demand not satisfied by secondary recovery. In any time period, say a year, the total domestic demand for a mineral commodity must be satisfied by some combination of: (1) primary production from domestic and foreign ores (2) secondary recovery, (3) imports of processed material, and (4) withdrawals from stocks. 12. Primary consumption is the amount of material used or consumed which has not been recycled. Demand forecasts and their relation to depletion forecasts The life of any mineral deposit or group of deposits depends, as previously pointed out, on two factors only: the total amount of economically recoverable material, and the rate of extraction. The greater the demand for a mineral commodity, the greater will be the incentive for rapid extraction from mines or wells producing that commodity or its ores. Consequently, increased demand tends to shorten production-history curves, while decreased demand tends to lengthen them. In a place or period of relative abundance of mineral resources, demand is encouraged, a steeply rising demand curve can be an instrument for planning, and planning is directed mainly toward increasing supply. In a place or period of relative scarcity of mineral resources, however, the demand side of the picture becomes much more important in planning. Until recently, most forecasts of U.S. demand for mineral resources have been based on simple projections of recent consumption trends occasionally modified by an assumption of technologic or political change. The fact that the steep upward projections shown on many charts could not continue indefinitely was ignored or denied. Now, these projections are beginning to be challenged; by analysts who regard the assumptions as naive, by economists who suspect that rising prices for mineral commodities will curtail demand, by geologists and engineers who doubt the existence of the resources necessary to 13. meet some of the projected demands, by environmentalists who foresee Good demand forecasts cannot be made independent of supply forecasts, for the cost of the supply will affect the demand, but they cannot be simple projections of consumption histories. It seems to have been overlooked that a consumption curve is a demand curve only for the historic range of prices; a projection of a consumption curve can be used as a demand curve only if it reflects carefully reasoned price projections; this latter requirement dictates a further requirement: that demand and supply projections be carried out simultaneously, and not separately. To regard demand for any commodity as independent of the supply available seems hazardous to planning, but especially is this true for nonrenewable resources, where supplies are limited by physical factors and susceptible to constraint by political action. Demand forecasts require knowledge of the reasons for current consumption trends. The effects on consumption of population growth, of changes in life style and social goals, and of the availability of new technology and new consumer items, need to be differentiated and analyzed. Demand forecasts should reflect evaluations of technological change, as well as of government intervention in the supply-demand system. An example of a widely used demand forecast that satisfies none of the above requirements is the demand forecast for natural gas in the United States published by the Future Requirements Committee in October 1971. Their projection to 1995 of national gas requirements 14. was based on a poll of every public and private organization that could be identified as a supplier of gas, and two of the assumptions on which it was predicated were: (1) that a supply of natural gas adequate to meet all requirements would be available during the entire period covered by the projection, and (2) that the then current relations of the cost of gas to other fuels would remain the same in the future! A projection based on such assumptions is rather difficult to find a good use for. Other examples of demand forecasts which appear to neglect both predictable supply constraints and foreseeable technologic impacts on consumption are readily available in the energy literature, where demand curves tend to be simplistic projections of recent portions of consumption curves. It is predictable that increases in the cost of electricity, already rather startling, will decrease potential demand, especially in the industrial sector. It is predictable that sharp increases in the cost, on a per-mile basis, of gasoline and diesel fuel for automobiles, will stimulate the demand for more economical vehicles which consume less energy per mile. It is predictable that demand curves for specific energy materials will be strongly affected by new environmental requirements that limit their use. Demand curves for petroleum should somehow reflect the probability that the gasoline-powered internal-combustion engine within the next 20 years may be declared an unacceptable urban citizen; if it is, not only will the demand curve for petroleum be affected, but also the demand curve of the energy source for the replacement system. It is predictable that increases in the cost of energy will encourage energy conservation on many fronts, through better thermal |