Mining News

Peak Everything?

Posted by Cheryl Rutledge on 9/9/2014 3:46:11 PM

by Kenneth P. Green

Are we running out of everything, again? That would appear to be the case based on a new infographic from Visual Capitalist, posted on Mining.com. According to the new estimates, the world will “run out” of oil shortly after 2050, gas around 2075, and uranium around 2080. Coal, we have in plenty, with an estimated expiration date of about 2136 at current production growth rates. Things seem more gloomy still for metals and minerals. According to Visual Capitalist’s estimates, we’ll run out of antimony in less than 10 years, lead, zinc, and gold by about 2030, silver and iridium a few years later. In other words, if you’re hoping for that gold or silver anniversary locket to get cheaper, you wouldn’t hold your breath.

Born in 2010 - How much metals and energy will be left
Figure 1 Source: Visual Capitalist and Mining.com

Those expiration dates are contingent, of course, on the world entering a period of market stasis in which prices don’t change, and discoveries don’t happen. Visual Capitalist does offer the qualification that reserves are fluid estimates partly dependent on price, and that higher prices can drive discovery. Still, by its nature, the graphic tends to reinforce the idea of limits to growth.

This would seem an opportune time to recount the story of Paul Ehrlich and Julian Simon who engaged in a famous wager in 1980. Paul Ehrlich, author of the Population Bomb was a well-known biologist (and early environmentalist) with a Malthusian view of the world. Ehrlich was convinced that humanity was quickly depleting its store of natural resources, and would begin experiencing scarcity, and accompanying high prices in the near future. Julian Simon was an economist who believed that human ingenuity would always find substitutes, and that the price signal would lead to new discoveries, hence, preventing us from running out of stuff.

The two men bet on the future price of a group of commodities (metals). If prices went up over ten years, Ehrlich’s thesis would be considered more correct, and he’d win the bet. If prices for those commodities went down over ten years, Simon would win the bet. Ehrlich chose the five commodities that he was sure would be depleted, and more expensive in a decade: chrome, copper, nickel, tin, and tungsten. A $200 bet was placed on the future value of each commodity. Ten years later, adjusted for inflation, the price of the metals had dropped as a group, and each of the metals in the group had also fallen in price individually. Simon won the bet, and the rest was history.

Some have pointed out that luck may have been a factor in Simon’s victory, and that the choice of start or end-time for the bet could have easily swung things the other way, a fact that Simon himself acknowledged. But more recently, economist Mark Perry looked at the overall trend for the Dow-Jones-AIG Commodity Index from 1934 to 2013, and that trend is clearly one of declining prices, and its trend is pretty clear:

Dow Jones - AIG Commodity Index
Figure 2 Source: Mark Perry and the American Enterprise Institute.

As Perry concludes:

I’m not so sure that Simon was just lucky. If Simon’s position was that natural resources and commodities become generally more abundant over long periods time, reflected in falling real prices, I think he was more right than lucky, as the graph above demonstrates. Stated differently, if Simon was really betting that inflation-adjusted prices of a basket of commodity prices have a significantly negative trend over long periods of time, and Ehrlich was betting that the slope of that line was significantly positive, I think Simon wins the bet.”

I’m not a betting person, but barring a complete disruption of world order, it seems more likely that we’ll find ourselves standing on the brink of 2030, with plenty of gold, antimony, silver, and other metals and fuels in sight, than that we’ll be recycling our jewelry rather than buying new.




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