Natural Resource Economics - Perpetual Resources Vs. Exhaustibility - Background and Introduction

Background and Introduction

The perpetual resource concept is a complex one because the concept of resource is complex and changes with the advent of new technology (usually more efficient recovery), new needs, and to a lesser degree with new economics (e.g. changes in prices of the material, changes in energy costs, etc.). On the one hand, a material (and its resources) can enter a time of shortage and become a strategic and critical material (an immediate exhaustibility crisis), but on the other hand a material can go out of use, its resource can proceed to being perpetual if it was not before, and then the resource can become a paleoresource when the material goes almost completely out of use (e.g. resources of arrowhead-grade flint). Some of the complexities influencing resources of a material include the extent of recyclability, the availability of suitable substitutes for the material in its end-use products, plus some other less important factors.

The Federal Government suddenly became compellingly interested in resource issues on December 7, 1941, shortly after which Japan cut the U.S. off from tin and rubber and made some other materials very difficult to obtain, such as tungsten. This was the worst case for resource availability, becoming a strategic and critical material. After the war a government stockpile of strategic and critical materials was set up, having around 100 different materials which were purchased for cash or obtained by trading off U.S. agricultural commodities for them. In the longer term, scarcity of tin later led to completely substituting aluminum foil for tin foil and polymer lined lined steel cans and aseptic packaging substituting for tin electroplated steel cans.

Resources change over time with technology and economics; more efficient recovery leads to a drop in the ore grade needed. The average grade of the copper ore processed has dropped from 4.0% copper in 1900 to 1.63% in 1920, 1.20% in 1940, 0.73% in 1960, 0.47% in 1980, and 0.44% in 2000.

Cobalt had been in an iffy supply status ever since the Belgian Congo (world's only significant source of cobalt) was given a hasty independence in 1960 and the cobalt-producing province seceded as Katanga, followed by several wars and insurgencies, local government removals, railroads destroyed, and nationalizations. This was topped off by an invasion of the province by Katangan rebels in 1978 that disrupted supply and transportation and caused the cobalt price to briefly triple. While the cobalt supply was disrupted and the price shot up, nickel and other substitutes were pressed into service.

Following this, the idea of a "Resource War" by the Soviets became popular. Rather than the chaos that resulted from the Zairean cobalt situation, this would be planned, a strategy designed to destroy economic activity outside the Soviet bloc by the acquisition of vital resources by noneconomic means (military?) outside the Soviet bloc (Third World?), then withholding these minerals from the West.

An important way of getting around a cobalt situation or a "Resource War" situation is to use substitutes for a material in its end-uses. Some criteria for a satisfactory substitute are (1) ready availability domestically in adequate quantities or availability from contiguous nations, or possibly from overseas allies, (2) possessing physical and chemical properties, performance, and longevity comparable to the material of first choice, (3) well-established and known behavior and properties particularly as a component in exotic alloys, and (4) an ability for processing and fabrication with minimal changes in existing technology, capital plant, and processing and fabricating facilities. Some suggested substitutions were alunite for bauxite to make alumina, molybdenum and/or nickel for cobalt, and aluminum alloy automobile radiators for copper alloy automobile radiators. Materials can be eliminated without material substitutes, for example by using discharges of high tension electricity to shape hard objects that were formerly shaped by mineral abrasives, giving superior performance at lower cost, or by using computers/satellites to replace copper wire (land lines).

An important way of replacing a resource is by synthesis, for example, industrial diamonds and many kinds of graphite, although a certain kind of graphite could be almost replaced by a recycled product. Most graphite is synthetic, for example, graphite electrodes, graphite fiber, graphite shapes (machined or unmachined), and graphite powder.

Another way of replacing or extending a resource is by recycling the material desired from scrap or waste. This depends on whether or not the material is dissipated or is available as a no longer usable durable product. Reclamation of the durable product depends on its resistance to chemical and physical breakdown, quantities available, price of availability, and the ease of extraction from the original product. For example, bismuth in stomach medicine is hopelessly scattered (dissipated) and therefore impossible to recover, while bismuth alloys can be easily recovered and recycled. A good example where recycling makes a big difference is the resource availability situation for graphite, where flake graphite can be recovered from a renewable resource called kish, a steelmaking waste created when carbon separates out as graphite within the kish from the molten metal along with slag. After it is cold, the kish can be processed.

Several other kinds of resources need to be introduced. If strategic and critical materials are the worst case for resources, unless mitigated by substitution and/or recycling, one of the best is an abundant resource. An abundant resource is one whose material has so far found little use, such as using high-aluminous clays or anorthosite to produce alumina, and magnesium before it was recovered from seawater. An abundant resource is quite similar to a perpetual resource. The reserve base is the part of an identified resource that has a reasonable potential for becoming economically available at a time beyond when currently proven technology and current economics are in operation. Identified resources are those whose location, grade, quality, and quantity are known or estimated from specific geologic evidence. Reserves are that part of the reserve base that can be economically extracted at the time of determination; reserves should not be used as a surrogate for resources because they are often distorted by taxation or the owning firm's public relations needs.