- Email: [email protected]
Nigel Mortimer replies:
Letters ‘For a critical assessment of the evaluative, rather than forecasting, use of EA. it is instructive to consult M. Webb and D.W. Pearce, ‘The economics of energy analysis’, Energy Policy, Vol 3, No 4. December 1975, pp 3 18331. 3 For a classic response to the use of engineering forecasts of costs, see G.J. Stigler, ‘The economies of scale’, Journal of Law and Economics, Vol 1, October 1958, pp 54-72. 4 Techniques of analysis are elaborated in J. Johnston, Statistical Cost Analysis. McGraw-Hill, New York, 1960. A standard text in the natural resource field is O.C. Herfindahl and A.V. Kneese, Economic Theory of Natural Resources, Charles Merrill, Columbus, OH, 1974. 5 Webb and Pearce, op cit. Ref 2. Recent developments in the economic forecasting of energy futures are discussed in K. Vaidya and S.C. Littlechild, ‘Energy forecasts’, University of Birmingham, Faculty of Commerce and Social Science, Discussion Paper, Series B, No 52, August 1978.
Nigel Mortimer replies: Sir: The application of cost engineering techniques to the results of geological commonly forms the consurveys ventional approach to investigating the potential of resources. current Geological data alone will only indicate what is physically present but will not determine what is particularly available for use. Energy analysis is the essential part of my paper on uranium resource assessment’ because the conventional approach, in its present form, is unintentionally misleading about the basic potential of energy resources. In the paper, no attempt is made to predict actual future costs, which depend on many factors in addition to fuel prices, but rather energy analysis is used to ensure that cost estimates are selfIn the field of energy consistent. information on the ‘net resources, energy balance’ is vital for consistency, since energy is not only the product but also a factor of production. The paper is concerned with ‘real’ costs which are evaluated on the basis that the price of fuel used in production is compatible with the cost of fuel subsequently generated. As such the real cost is an expression of the basic cost of a future energy resource because the value of one specific factor, energy, self-determining. is treated as
268
Consequently, such real costs are very important in describing the limits of resource availability in terms of existing or newly-developing technology. The simple model used in the paper can, like any costing procedure, recognize and accommodate the impact of technological change.2 In addition, the model does not ‘treat all energy as since information on homogeneous’, different fuels is handled separately to allow for the assessment of inter-fuel substitution and competition. In this way, energy analysis is applied to investigation of longer-term (20-50 years) resource policy. This perspective is important as decisions taken now about how rapidly to expand energy technologies are, to some extent, based on expectations of resources for the foreseeable future. The expected economic availability of uranium from low-grade sources, for example, can influence nuclear power forecasts. Such perception helps to set the framework for commitment to given technologies. However, it does not determine shortterm effects and the paper does not pretend to address the important, and immediate, market aspects which must be examined by other procedures. In the wider context, the general criticisms of energy analysis, like those of the past,3 are somewhat academic. Energy analysis, as a practical technique, continues to attract interest from a range of working scientists, economists, managers, planners etc. In resource area of uranium the
assessment alone, the technique is finding frequent usage. In a joint report by the OECD Nuclear Energy Agency and the IAEA,4 discussing additional sources of uranium, it was recently stated that ‘it would be essential to ensure that there would be a positive net energy balance associated with the exploitation and utilisation of such an energy resource in conventional nuclear power reactors’. This, and numerous other examples5 suggests that energy analysis is adding to the useful information required for a more rational view of resource policy.
Nigel Mortimer Sunderland
Polytechnic,
UK
’ Nigel Mortimer. ‘Uranium resource economics - an application of energy analysis’, Resources Policy, Vol 6, No I. March 1980, pp 19-32. ‘See, eg, ibid, p 26, Ref 23. 3 M. Webb and D.W. Pearce, ‘The economics of energy analysis’ Energy Policy, Vol 3, No 4, December 1975, pp 318-331. a Organisation for Economic Cooperation and Development, Nuclear Energy Agency, World Uranium Potential: An International Evaluation, HMSO, London, December 1978. = P.H. Mutschler. J.J. Hill and B.B. Williams, Uranium From Chattanooga Shale: Some Problems Involved in Development, US Bureau of Mines, Washington, DC, USA, 1976; and M. Spriqqs. ‘The potential of unconventional sources of uranium’, Nuclear Engineering lnternationa/, Vol 25, No 298, April 1980. pp 45-48.
World mineral reserves and demand Sir: Any reader of Resources Policy must be aware that reserve estimates and demand forecasts change over time, but I have just been surprised by the extent of many of the changes in figures published by the US Bureau of Mines. I take John Morgan’s figures in your March issue’ as a revision of those given in the USBM’s Mineral Facts and Problems (1976 publication), and these are the two sets I am comparing. First, changes in reserves (see Table I). I have taken only those minerals for which Morgan gives a ratio between reserves and cumulative world demand
to 2000 of 5:l or less. Reserves of molybdenum have grown by 52%, and of bismuth, by 40%; nine others grew between 12% and 1%. However, reserves declined for I1 of them - and by 10% or more for seven of them, the 40% decline for asbestos being the extreme. Overall world reserves increased for I1 items, declined for 11, and remained unchanged for nine. Cumulative world demand up to 2000 (see Table 2) has grown for four of these commodities (highest: cobalt, 9% up in total), remained unchanged for one (rhodium), and declined for 29 (the
RESOURCES
POLICY
September
1980
LetterslResources Table 1. Changes
in reserves
(%I. USA
Rest
Molybdenum Bismuth
52 40
23 -33
79
Copper
12
3
14
Gypsum
11
43
5
Zinc Tungsten Mercury
11 67
-20 -916
19 7 7
Antimony
4
20
3
lndium
4
0
5
Selenium
1
World
Platinum,Nickel,Palladium, Germanium,Rhodium,Zirconium Pumice,Garnet,Talc
SPRU of Sussex, UK
No change
-2
11
-1 -8 - 10 -11
Tantalum Sulphur Lead Cobalt Asbestos
-13 -15 -18 -39 -40
demand
Resources reading
-722 -17 0 -3
,i
0
$
0
-39 -39
-11 -53
2
-66
Bauxite and Aluminum: An Introduction to the Economics of Nonfuel Minerals by
(XI. World
USA
Cobalt
9
-13
Mica (sheet) Molybdenum Asbestos Rhodium Gold Platinum Sulphur Zirconium Germanium Talc Pumice Antimony Mercury
8 5 3
-24
RESOURCES
William Page
1
-4
I
Tin Cadmium Gold Manganese Titanium
Titanium Manganese Palladium Cadmium Mica (scrap, flake) Tungsten Nickel Tantalum Bismuth Garnet lndium Copper Lead Tin Selenium Zinc Silver Fluorine Graphite Strontium
caution.
University
Fluorine
Table 2. Changes in cumulative
extreme being the 58% decline for strontium). While the need for reserve estimates and long-term forecasts is generally accepted, the extent of some of these changes (especially regarding cumulative demand) draws attention once again to the importance of handling such numbers with great
2
1
2
Silver
66
reading
20 16
9
0 No change -28 5 -7 -20 -8 -16 -8 0 -6
-9 -10 -11 -11 -11 -12 -13 - 13 - 14 -15 -15 -17 -18 -18 -19 -20 -33 -31 -40 -58
-19 -11 -29 -14 - 17 -6 -8 -12 -29 -20 -21 -22 -20 -28 -22 -36 -21 -35 -33 -32
1980
reviewed)
9
-35
-2 -3 -4 -4 -5 -5 -7 -9 -9
POLICY September
Rest
Ferdinand E. Banks (D.C. Heath, Lexington, MA, 1980, 187 pp, f13.00, USA, $27.50, USA) Introduction to the economics of non-fuel minerals in general and the bauxite/alumina/aluminium industry in particular. Provides a complete and up-todate analysis of the outlook for the problems of this industrv in Australia. currentlv the world’s largesf bauxite supplier. (To be
7
-6 -3
- 10 -4 -3
-7 -13 -10 -6 - IO -4 -10 -3 -14 -15 -15 -6 -6 - 14 -15 - 17 - 15 - 16 - 15 -24 -30 -42 -75
Canadian Mining Journal 1980 Annual Mineral Review and Forecast, (Vol 100, No 20, Feb elsewhere). Coal
1980,
$3.00,
Canada,
$5.00
Mines - Health and Safety 1978
(HMSO, London, Appendixes, f 1SO).
1979,
32
PP
+
Commodities Finance and Trade: Issues in North South Negotiations by Arjun Sengupta, ed (Frances Pinter, London, 1980,407~~) Papers and proceedings of the seminars undertaken by the Centre for Research on the New International Economic Order, Oxford and the Chr Michelsen Institute, Bergen. (To be reviewed)
Demolition Waste prepared for the Commission of the European Communities by Environmental Resources Ltd (Construction Press, Lancaster, and Longman, New York, 1980, 175 pp,&15.00) Subtitled ‘An examination of the arisings, end-uses and disposal of demolition wastes in Europe and the potential for further recovery of materials from these wastes’. A report commissioned for the CEC.
269
Nigel Mortimer replies: Sir: The application of cost engineering techniques to the results of geological commonly forms the consurveys ventional approach to investigating the potential of resources. current Geological data alone will only indicate what is physically present but will not determine what is particularly available for use. Energy analysis is the essential part of my paper on uranium resource assessment’ because the conventional approach, in its present form, is unintentionally misleading about the basic potential of energy resources. In the paper, no attempt is made to predict actual future costs, which depend on many factors in addition to fuel prices, but rather energy analysis is used to ensure that cost estimates are selfIn the field of energy consistent. information on the ‘net resources, energy balance’ is vital for consistency, since energy is not only the product but also a factor of production. The paper is concerned with ‘real’ costs which are evaluated on the basis that the price of fuel used in production is compatible with the cost of fuel subsequently generated. As such the real cost is an expression of the basic cost of a future energy resource because the value of one specific factor, energy, self-determining. is treated as
268
Consequently, such real costs are very important in describing the limits of resource availability in terms of existing or newly-developing technology. The simple model used in the paper can, like any costing procedure, recognize and accommodate the impact of technological change.2 In addition, the model does not ‘treat all energy as since information on homogeneous’, different fuels is handled separately to allow for the assessment of inter-fuel substitution and competition. In this way, energy analysis is applied to investigation of longer-term (20-50 years) resource policy. This perspective is important as decisions taken now about how rapidly to expand energy technologies are, to some extent, based on expectations of resources for the foreseeable future. The expected economic availability of uranium from low-grade sources, for example, can influence nuclear power forecasts. Such perception helps to set the framework for commitment to given technologies. However, it does not determine shortterm effects and the paper does not pretend to address the important, and immediate, market aspects which must be examined by other procedures. In the wider context, the general criticisms of energy analysis, like those of the past,3 are somewhat academic. Energy analysis, as a practical technique, continues to attract interest from a range of working scientists, economists, managers, planners etc. In resource area of uranium the
assessment alone, the technique is finding frequent usage. In a joint report by the OECD Nuclear Energy Agency and the IAEA,4 discussing additional sources of uranium, it was recently stated that ‘it would be essential to ensure that there would be a positive net energy balance associated with the exploitation and utilisation of such an energy resource in conventional nuclear power reactors’. This, and numerous other examples5 suggests that energy analysis is adding to the useful information required for a more rational view of resource policy.
Nigel Mortimer Sunderland
Polytechnic,
UK
’ Nigel Mortimer. ‘Uranium resource economics - an application of energy analysis’, Resources Policy, Vol 6, No I. March 1980, pp 19-32. ‘See, eg, ibid, p 26, Ref 23. 3 M. Webb and D.W. Pearce, ‘The economics of energy analysis’ Energy Policy, Vol 3, No 4, December 1975, pp 318-331. a Organisation for Economic Cooperation and Development, Nuclear Energy Agency, World Uranium Potential: An International Evaluation, HMSO, London, December 1978. = P.H. Mutschler. J.J. Hill and B.B. Williams, Uranium From Chattanooga Shale: Some Problems Involved in Development, US Bureau of Mines, Washington, DC, USA, 1976; and M. Spriqqs. ‘The potential of unconventional sources of uranium’, Nuclear Engineering lnternationa/, Vol 25, No 298, April 1980. pp 45-48.
World mineral reserves and demand Sir: Any reader of Resources Policy must be aware that reserve estimates and demand forecasts change over time, but I have just been surprised by the extent of many of the changes in figures published by the US Bureau of Mines. I take John Morgan’s figures in your March issue’ as a revision of those given in the USBM’s Mineral Facts and Problems (1976 publication), and these are the two sets I am comparing. First, changes in reserves (see Table I). I have taken only those minerals for which Morgan gives a ratio between reserves and cumulative world demand
to 2000 of 5:l or less. Reserves of molybdenum have grown by 52%, and of bismuth, by 40%; nine others grew between 12% and 1%. However, reserves declined for I1 of them - and by 10% or more for seven of them, the 40% decline for asbestos being the extreme. Overall world reserves increased for I1 items, declined for 11, and remained unchanged for nine. Cumulative world demand up to 2000 (see Table 2) has grown for four of these commodities (highest: cobalt, 9% up in total), remained unchanged for one (rhodium), and declined for 29 (the
RESOURCES
POLICY
September
1980
LetterslResources Table 1. Changes
in reserves
(%I. USA
Rest
Molybdenum Bismuth
52 40
23 -33
79
Copper
12
3
14
Gypsum
11
43
5
Zinc Tungsten Mercury
11 67
-20 -916
19 7 7
Antimony
4
20
3
lndium
4
0
5
Selenium
1
World
Platinum,Nickel,Palladium, Germanium,Rhodium,Zirconium Pumice,Garnet,Talc
SPRU of Sussex, UK
No change
-2
11
-1 -8 - 10 -11
Tantalum Sulphur Lead Cobalt Asbestos
-13 -15 -18 -39 -40
demand
Resources reading
-722 -17 0 -3
,i
0
$
0
-39 -39
-11 -53
2
-66
Bauxite and Aluminum: An Introduction to the Economics of Nonfuel Minerals by
(XI. World
USA
Cobalt
9
-13
Mica (sheet) Molybdenum Asbestos Rhodium Gold Platinum Sulphur Zirconium Germanium Talc Pumice Antimony Mercury
8 5 3
-24
RESOURCES
William Page
1
-4
I
Tin Cadmium Gold Manganese Titanium
Titanium Manganese Palladium Cadmium Mica (scrap, flake) Tungsten Nickel Tantalum Bismuth Garnet lndium Copper Lead Tin Selenium Zinc Silver Fluorine Graphite Strontium
caution.
University
Fluorine
Table 2. Changes in cumulative
extreme being the 58% decline for strontium). While the need for reserve estimates and long-term forecasts is generally accepted, the extent of some of these changes (especially regarding cumulative demand) draws attention once again to the importance of handling such numbers with great
2
1
2
Silver
66
reading
20 16
9
0 No change -28 5 -7 -20 -8 -16 -8 0 -6
-9 -10 -11 -11 -11 -12 -13 - 13 - 14 -15 -15 -17 -18 -18 -19 -20 -33 -31 -40 -58
-19 -11 -29 -14 - 17 -6 -8 -12 -29 -20 -21 -22 -20 -28 -22 -36 -21 -35 -33 -32
1980
reviewed)
9
-35
-2 -3 -4 -4 -5 -5 -7 -9 -9
POLICY September
Rest
Ferdinand E. Banks (D.C. Heath, Lexington, MA, 1980, 187 pp, f13.00, USA, $27.50, USA) Introduction to the economics of non-fuel minerals in general and the bauxite/alumina/aluminium industry in particular. Provides a complete and up-todate analysis of the outlook for the problems of this industrv in Australia. currentlv the world’s largesf bauxite supplier. (To be
7
-6 -3
- 10 -4 -3
-7 -13 -10 -6 - IO -4 -10 -3 -14 -15 -15 -6 -6 - 14 -15 - 17 - 15 - 16 - 15 -24 -30 -42 -75
Canadian Mining Journal 1980 Annual Mineral Review and Forecast, (Vol 100, No 20, Feb elsewhere). Coal
1980,
$3.00,
Canada,
$5.00
Mines - Health and Safety 1978
(HMSO, London, Appendixes, f 1SO).
1979,
32
PP
+
Commodities Finance and Trade: Issues in North South Negotiations by Arjun Sengupta, ed (Frances Pinter, London, 1980,407~~) Papers and proceedings of the seminars undertaken by the Centre for Research on the New International Economic Order, Oxford and the Chr Michelsen Institute, Bergen. (To be reviewed)
Demolition Waste prepared for the Commission of the European Communities by Environmental Resources Ltd (Construction Press, Lancaster, and Longman, New York, 1980, 175 pp,&15.00) Subtitled ‘An examination of the arisings, end-uses and disposal of demolition wastes in Europe and the potential for further recovery of materials from these wastes’. A report commissioned for the CEC.
269