The Exhausted Resources

There seems to be a fair amount of concern about resource exhaustion, by which we mean we’ve seen a number of articles and comments regarding the “fact” that we are rapidly exhausting the world’s natural resources. This has lead us to ask a simple question: Have we to date depleted any natural resources? We are continuing to research this topic but here are some of our thoughts based on our initial research.

Have we to date depleted any natural resources?

This is a much more complicated subject than one might imagine. Depletion has different meanings to different groups. To an economist, depletion occurs when the cost to recover a resource is greater than its value. But recovery costs and resource values can (and do) change over time which means this economic definition of exhaustion can be very dynamic. Technological improvements can reduce the costs of recovery and technological changes or indeed changes in human behavior can reduce demand for certain resources.

Non-economists think in more absolute terms; either we’ve exhausted a resource or we haven’t. In practice, the economic way of thinking may be more practical. If we use crude oil as an example, it seems impossible that we will ever find and use every last barrel of oil on the planet. But one can theorize that we might use all of the oil that can be recovered at a price that is less than its value.

Once you begin to think of the problem in these terms it is interesting to think about the current recovery price and historic value of oil. Not too long ago the price of oil was $10 per barrel (see note at bottom of page). If that were the price today then one might conclude that oil was exhausted as recovery costs are above this level. (This gets slightly more complicated as part of the recovery cost of oil is the cost of discovery and for already discovered oil that cost is considered a sunk cost versus the incremental cost of extraction. Which is to say that extraction could continue even if the all in cost (discovery and extraction) might be higher than the current price.) Put differently, using the economists’ definition of exhaustion, if the price of oil were to decline dramatically because demand collapsed (let’s assume because alternative energy gained sufficient market share) then oil, which at $100 plus per barrel is abundant, would be considered exhausted. We point this out just to provide some context to the difficulty inherent in the exhaustion question itself. We also point this out because our view is this is exactly how the planet will be depleted of oil, namely there will be plenty of oil available (but likely expensive to recover) but renewable energy (by which we really mean solar power) will become sufficiently abundant (and inexpensive) to reduce the demand for, and price of, oil below its recovery cost. This scenario highlights a dichotomy regarding the price and exhaustion. Most would assume that a nearly exhausted resource would be accompanied by an extremely high price. But, the opposite may be the case. A declining market price may be the cause of resource exhaustion.

The only mention we could find of any truly exhausted resource is cryolite…

We polled a number of experts on the topic of depletion and the responses we received were consistent in two ways. First, most responded with a list comprised exclusively of plants or animals (e.g. buffalo) that were extinct or nearly extinct. In fact, other than the Dodo bird and passenger pigeon, our respondents only cited near extinct plants and animals. We make this point because in theory a nearly extinct species could be regenerated (e.g., buffalo). (This may even be true for truly extinct species as well: see this article from the National Geographic or this one about the cloning of the passenger pigeon.) Second, none of our expert respondents cited any inanimate natural resources that might be considered non-renewable.

The only mention we could find of any truly exhausted resource is cryolite, whose primary use was in the processing of aluminum. The last remaining cryolite mine, based in Ivittuu, Greenland was shuttered in 1987. It must be noted that there are still known reserves of cryolite but the known amounts are in small quantities and are uneconomical to mine; cryolite is only exhausted under the economists’ definition of exhaustion. Fear not: a substitute has been found to replace cryolite in the processing of aluminum.

The BBC has an article online that discusses resources that have the potential to become exhausted. The article links to a Stock List which lists exhaustion estimates for a variety of natural resources.  The list classifies resources into a number of categories including ecosystems, fossil fuels and minerals. Among the ecosystems is the Amazon which is estimated to be completely deforested in 196 years. The problem with this sort of estimate is that it doesn’t take into account changes in human behavior. Quick Quiz: Are there more trees in the US today than there were 100 years ago?  Answer, yes. A lot more. (See also Forest Facts & Historical Trends from the US Department of Agriculture.) As the US economy developed and moved from an agrarian based economy there was no longer the same need to deforest. The same can clearly happen in the developing world. This argument can also be made of the non-renewable resources, mainly that advances in extraction technologies and consumption rates tend to make these projections meaningless. Aluminum is on the BBC list with an 80 year estimate for years remaining. Yet, aluminum can be (and is) recycled and, further is the third most abundant metal in the earth’s crust. Over time advances in technology make the usage rates change dramatically. These changes are not necessarily predicated on a pending shortage. A switch from whale oil to petroleum wasn’t undertaken because whale oil was being depleted; the switch took place because technology allowed for the usage of a superior product.

It is clear that a number of plants and animals have become extinct, and in many (but not all) cases these extinctions are a function of human activity. The passenger pigeon, which we’ve already referenced twice in this article, has received a lot of attention of late, including the recently published book by Joel Greenberg, A Feathered River Across the Sky: The Passenger Pigeon’s Flight to Extinction (reviewed by the New Yorker). We specifically mention the passenger pigeon because this is a clear case of human activity leading to the extinction.

Extinction is a component of resource exhaustion and needs to be part of this discussion. However, when most people think of resource exhaustion they’re generally referring to inanimate resources like minerals or petroleum. Our view is that worries about resource exhaustion are misguided. There is and always will be an economic argument regarding resource recovery: specifically there is always the possibility that recovery costs may be in excess of value. But, as we’ve discussed, the economics of recovery and value is dynamic in nature and can work in either direction. Changes in human behavior, technology and supply demand dynamics all play a part in  the exhaustion equation.


Note on price of oil: In 1974 and 1975 the price of oil was in the $10 range. As recently as 1998 it was in the $12 range. See the BP Statistical Review of World Energy 2014.


Your thoughts? Agree? Disagree? Wish to express an opinion, point out a mistake or generally reorient our thinking? Feel free to send an email to editor(at) We will likely respond and may even publish your comment.