Estimation of resources and reserves

Abstract

This report analyzes the economics of resource and reserve estimation. Current concern about energy problems has focused attention on how we measure available energy resources. One reads that we have an eight-year oil supply and a 500-year coal supply, implying that we must inevitably turn to coal. Uranium is either seen as scarce, implying the necessity of the breeder reactor, or it is seen as plentiful, implying no need for plutonium in reactors. Motivating these statements, which profoundly affect the tenor of our future, is an interpretation of how resources and reserves are estimated. And, as we shall see, the interpretation is more often than not incorrect; stocks of resources are confused with flows; flows are what economists call supply.

The five parts of this report take an in-depth look at resource and reserve estimation for oil, gas, coal, and uranium. Our goal is not to provide a "good" estimate of what lies beneath the surface of the earth, but to deal with the crucial concepts lying behind resource and reserve estimation. What do geologists measure and how well does this interact with the economists' notion of supply? The fault in estimation is rarely geological, but rather economic. The concept of abundance is an economic one and we ask what geological information means when interpreted in light of economic reasoning.