Peak Uranium? Predictions of Uranium Shortages Appear Overblown
Recent concerns over CAGW have led many planners--and even environmentalists--to suggest that increased use of nuclear power may reduce CO2 dumping into the atmosphere. But many anti-nuclear activists are claiming that there is a shortage of uranium which prevents any large scale nuclear energy alternatives. What is the reality?Uranium is a common mineral--as plentiful as tin.
Uranium prices reached an all-time low in 2001, costing US$7/lb, but have since rebounded strongly. As of January 2007, uranium sells at US$72/lb and the price is rising fast. This is the highest price (adjusted for inflation et cetera) in 25 years [2]. The higher price has spurred new prospecting and reopening of old mines. Cameco and Rio Tinto Group are the top two producing companies (with 20% of the production each), followed by Areva (12%), BHP Billiton (9%) and Kazatomprom (9%).Source
Deposits of uranium lie primarily in Canada, Australia, the US, South Africa, and countries of the former USSR. There is tremendous flexibility in the production of uranium, depending on pricing and political/regulatory conditions. Currently Canada and Australia are the world's major producers, but producers in the third world are gearing up for higher production with Chinese and Russian backing.Realistically, "Peak Uranium", like "Peak Oil", is an almost meaningless term. Better terminology would refer to pricing of these commodities--which reflects supply, demand, and political/regulatory factors. Although some people have seized upon this report that suggests an impending bottleneck of uranium supplies for the US, more informed individuals with a broader perspective of commodities markets will understand that markets find a way--even when ivory tower academics can only see government action as a solution.
The important thing is to assure that government regulatory agencies do not make it impossible for the market to function.
Labels: CAGW, nuclear energy, peak uranium
posted by al fin at 8:29 am
5 Comments:
I've been an investor in a uranium company for 2 years and I've been following the industry during that time and especially lately. It takes 10 or even 20 years between discovering uranium and producing it at a high rate. In many places such as most of Australia, it's all political and a mine might not ever go into production.
There won't be any sort of long term lack of uranium for reactors. Like you had said, uranium is not scarce. But the problem is that supply isn't nearly up to demand right now and and demand is going to be increasing fast. And there has been almost no exploration in the last 20 years.
The nature of the market is that both demand and supply are very inelastic. If you raise the price, demand doesn't go down and supply doesn't increase much except over a very long time period (a decade at minimum). What's most interesting about this is that the range of inelasticity is huge. The uranium spot price is now nearly $100. It could probably reach $500 before demand starts to get very elastic. They don't shut down reactors because the the fuel price goes up because fuel is a small part of the cost of nuclear power. Even when shutting it down, you still have big costs.
Supply is more elastic, but not by all that much. The problem is that the industry has been largely inactive for a very long time. Mining engineers, mining equipment, and knowledge are now fairly scarce. They won't stay that way with prices this high. But it will take more than a decade to reach an equalibrium. In the meantime, the bottlenecks will pay very well (I hear an electrician in Wyoming can make $100,000 per year in the mining industry right now). And a lot of the troubles happening in the industry such as the 2nd Cigar Lake mine flood are a result of the long term neglect: Cigar Lake is a very difficult mine, but it's what they've got to work with.
Electricians, welders, and other skilled workers can indeed make over US $100,000 in many of the boom areas of North America--not just in Kuwait, Iraq, and the Persian Gulf.
The mining areas of Wyoming and Alberta are veritable gold mines for people with the right skills.
As for the inelasticity in the supply side of Uranium, I will take your word for it, while expecting both of us to be surprised a bit by what actually happens.
I agree that the supply and demand is not elastic. The current nuclear plants do not have much choice. However the current price increase is not due to current supply/demand imparity but due to the perceived future supply/demand imbalance. If the price go to $500.00, it will make the planner to rethink about their future nuclear plant building plan.
A good portion of the inelasticity of supply comes from government regulation. Should the governments of the world decide to facilitate the mining and processing of uranium for energy plants, much of the inelasticity would disappear in a puff.
A good study on the amazing facilitation of production and R/D by government is the US Roosevelt administration during World War II.
A good study on the amazing facilitation of production and R/D by government is the US Roosevelt administration during World War II.
eric
http://www.1gameconsole.com
http://1gameconsole.blogspot.com
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“During times of universal deceit, telling the truth becomes a revolutionary act” _George Orwell
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