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Unit 10: Energy Challenges // Section 2: Thinking About Supply

Because energy and other mineral resources are so central to our lifestyle in developed countries, they often make news when prices rise and supplies tighten. At these times, national leaders and consumers alike want to know how much of the scarce resource remains, when it will run out, and what alternatives exist. These debates are sometimes cast in stark terms—asking, for example, when the world will run out of oil.

In reality, societies never use up nonrenewable resources completely or exploit the entire flow of renewable resources. Typically the best deposits and sites are found and exploited first, followed by other lower-quality sources as demand rises. As demand grows and a resource becomes scarce, its price rises. This reduces demand and gives explorers incentive to develop sources that are lower-quality and/or more expensive to exploit, and to improve technologies for locating, extracting, and processing the resource.

Rising prices also spur the development of substitutes that were uneconomic when the original resource was cheap. For example, as discussed later in this unit, high oil prices are driving significant investments today into fuel production from plant sources (Fig. 3). In the words of Sheikh Zaki Yamani, a former oil minister of Saudi Arabia, "The Stone Age did not end for lack of stone, and the Oil Age will end long before the world runs out of oil" (footnote 1). The race is between finding new supplies and exploiting them more efficiently on one hand and declining resource abundance and/or quality on the other.

Pump offering bio-based fuels, Santa Fe, New Mexico

Figure 3. Pump offering bio-based fuels, Santa Fe, New Mexico
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Source: © Bensinger, Charles and Renewable Energy Partners of New Mexico.

The concepts of stocks and flows are important in thinking about resource supplies. A stock is the amount of material in a certain deposit or reservoir—for example, the total quantity of oil in a field that can be recovered with today's technology. Flow refers to the rate at which new material is added to the stock (inflow) or removed from the stock (outflow). The net flow rate (inflow minus outflow) determines whether the stock grows, shrinks, or remains constant.

Non-renewable resources are limited by the size of their stock, but energy developers consider stocks on several levels. For example, total U.S. copper resources include all known copper deposits and those that are estimated or believed to exist, even if they cannot be economically found or extracted with today's technology. Reserves are the subset of this supply whose location is known or very likely based on geological evidence and that can be extracted profitably with current technology at current prices. A larger fraction, often referred to as unrecoverable or ultimately recoverable reserves, will require technical advances to locate and develop economically.

These categories are imprecise and shift as exploration and technology breakthroughs enable us to recover supplies that once were out of reach. Figure 4 shows current estimates of how many trillion cubic feet of natural gas the United States has in each of these categories—including sources such as methane hydrates (discussed further below) that cannot be exploited today but could become an important source in coming decades.

Profile of domestic natural gas resources

Figure 4. Profile of domestic natural gas resources
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Source: © United States Department of Energy. Energy Information Administration, National Petroleum Council. United States Geological Survey.

In contrast, use of renewable resources is limited by their flow rate, which can be divided into total flow and exploitable flow—the portion that can be practically exploited with current technology. The fraction of the total flow that is exploitable depends on the abundance of sites where the resource is sufficiently concentrated and close enough to the point of end-use to be harnessed economically—a question that naturally depends in part on the state of the technology available for doing so. For example, the United States has good wind resources in the Great Plains states, but many of the windiest regions are far from major electricity demand centers, so the cost of building long-distance transmission lines affects decisions about where wind farms are built.

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