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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 avail

able 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 concentra

tions 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

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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.

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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 stee

rising demand curve can be an instru

ment 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

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meet some of the projected demands, by environmentalists who foresee

more pollution and land-use problems from rising mineral exploitation
and use, and by all those who worry about the rapidly increasing
dependence of this nation on foreign sources for some of its most needed

mineral and energy resources.

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 pro

jections 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

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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 require

ments 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 re

placement system.

It is predictable that increases in the cost of energy

will encourage energy conservation on many fronts, through better thermal

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