In the theoretical models of depletable energy supply we have discussed, measures of reserves or resources play a significant role as indicators of cost drivers, not just in terms of physical availability. Before looking at efforts to model empirically depletable energy supply, therefore, it is worth making some brief comments on the nature of available data for reserves.
The classification scheme of the United States Geological Survey defines total resources, including energy resources, as materials that have been discovered or might be discovered and used. Reserves are that portion of total resources that can be economically extracted. Undiscovered resources are classified as hypothetical, if in a known mining district, or speculative. Identified but currently noneconomic resources are categorized as paramarginal or submarginal. The physical measures of reserves often are compared to measures of the rate of use in order to determine the remaining life of the reserves.
Because reserves are defined in terms of economic recovery, whether a deposit is classified as a reserve changes with the resource price and extraction cost. In addition, because costly investment is required to ‘‘prove’’ reserves, there is a limited incentive to prove reserves beyond a certain point. The ratio of reserve to consumption for petroleum increased from 35 in 1972 to 45 in 1990, even though commercial energy consumption increased by more than 50% between 1971 and 1991. Physical measures of reserves thus probably have more meaning as an indicator of inventory on hand than as a more fundamental indicator of resource cost.