Uranium is an increasingly important source of energy.  It is currently of great interest to institutions responsible for providing energy for citizens because:

• It is a clean burning fuel whose use does not produce greenhouse gases which may lead to global warming.  All carbon based fuels produce greenhouse gases.  This includes oil, gas, coal, and trees.

• The cash cost of uranium is very low compared to the costs of other fuels (oil, natural gas, coal).  The fuel is very efficient in that huge amounts of energy are produced from very small amounts of fuel. 

• The technology is proven and reliable.  The other proven technologies which can produce dependable energy in quantity are the carbon based organic fuels such as oil, gas, coal, and hydro power resulting from harnessing water flow in natural falls or damns.  New technologies such as hydrogen, wind, solar, geothermal and ethanol are unproven at the present time, either in terms of technology, cost, or the ability to produce sufficient amounts of energy to make a valuable contribution.

• Only small amounts of waste are produced.

Uranium Prices and Nuclear Energy Demand:

Nuclear power stations work in essentially the same way as fossil fuel burning stations.  The difference is that while with fossil fuels it is the chemical oxidation of the fuel (i.e. burning) that releases energy, with uranium it is the fission of atomic nuclei in “chain reactions” that releases energy.  A reactor uses uranium rods as fuel, and the heat is generated by nuclear fission.  In both cases water is then heated to produce steam and the steam drives turbines thereby producing electricity. 

As the demand for nuclear energy increases, so will the demand for uranium, and therefore the price of uranium.  Higher uranium prices will increase increased profits for Uranium miners.

Due to decreased supplies of uranium and the dramatically increased anticipated demand for the fuel, uranium prices have been increasing dramatically.  During 2006 the price per pound has increased from $36.00 per pound to $47.25 per pound.

The Importance of Growing Demand for Electricity around the World:

Civilization runs on brains, material, and energy.  Civilization’s ability to make energy available to producers and consumers on an ever increasing scale is one of the necessary factors which have increased the standard of living over the last few hundreds of years.  The amount of energy available per person has increase hundreds of times. 

In industrial countries the average energy used per person is between 150 and 350 gigajoules per person per year.   (http://www.world-nuclear.org/education/whyu.htm).  An increasing amount of this energy is used in the form of electricity.   One calorie is equal to 4.186 joules.  A megajoule is one million joules and a gigajoule is one billion joules.  In measuring food energy content the term calorie actually refers to 1000 calories or 4186 joules.  In terms of food energy the average person consumes about 8 megajoules per day or 3 gigajoules per year.  Therefore the energy utilization per person in industrial countries is almost all for purposes other than the physical survival of the body: i.e. transportation, heat, lighting, and industrial production.  Since for most of history man consumed only enough energy to live, clearly at an average consumption of 150 to 350 gigajoules per person per year, modern society could not exist without the use of relatively massive amounts of energy.  Most of this energy is used for two functions: (1) Transportation – almost 100 per cent oil; and (2) Electricity – Coal, Gas, Hydro, Uranium, and Oil.

Nuclear energy is of particular importance because the energy in uranium is profoundly efficiently packed. 

The efficiency of the packing of energy in megajoules per kilogram is as follows:

Nuclear energy is used to produce electricity, so the world growth demand for electricity is important in establishing the demand for nuclear energy and uranium.  According to the Department of Energy world electricity demand is expected to double between 2002 and 2030.  Non-OECD countries will account for 71 % of the growth.  In East Asia while the demand for general energy consumption is growing at 5% per year the demand for electricity is growing at 7% - 8% per year.  Around the world the demand for energy grows at the same rate as the growth in the overall economy.  So it is clear that increasing overall world economic growth rates, particular the contribution from Asia, causes commensurate increases in the demand for energy, primarily for use in transportation and electricity.   

The sources of fuels used to generate electricity have changed dramatically since the 1960’s.  High world oil prices brought on by the oil price shocks after the oil embargo of 1973-1974 and the Iranian revolution in 1979 caused a significant reduction in the use of oil for electricity generation.   There was a switching from oil-fired generation to natural gas and nuclear power.  While Coal remains the most important fuel for generating electricity, this source has come to be recognized as a very significant contributor to greenhouse gases and therefore, in the opinion of many groups, global warming.  Just as in the 1970’s high world oil prices encouraged switching from oil to gas and nuclear power, now the high price of both oil and gas, in conjunction with a greater concern for global warming, is causing an increased demand for nuclear power and therefore uranium.  So it is both the increasing cost of oil and gas, and the increasing demand for electricity, which is making uranium look like “the best energy alternative”.  In May of 2006 The Consumer Energy Council of America published a report in which it concluded that nuclear energy is the only proven resource that can reduce greenhouse gas production significantly.

One ton of uranium generates as much power as 25,000 tons of coal.  Uranium makes up only 5 per cent of the costs of operating a power plant, while natural gas costs approximate 75 per cent of the cost of running a gas-fired electricity plant.  The World Nuclear Association says that there are 27 nuclear reactors under construction in the world and 38 in planning stages.  Another 115 reactors have been proposed.


The Possible Problem with Oil and Gas – A Geological Perspective:

According to a significant number of energy analysts with oil geology expertise the world faces an oil supply problem: the rate of annual world oil production has stopped growing.¹ According to these analysts annual world oil production peaked in 2005.  Such predictions were first made by M. King Hubbert, a respected oil geologist who had worked at Shell labs for many years.  He predicted in 1956 that the peak of annual U.S. oil production would occur in 1970.  His prediction proved to be accurate.²

Various oil production peaks have occurred, or will occur, because oil supply is finite and not renewable.  The rate of oil production refers to the economic extraction and refining of oil which is currently about 84 million barrels per day.  Once the halfway point of all reserves is reached, then peak production has been reached.  After that, production becomes increasingly likely to decline and oil starts becoming far more expensive.  Peak Oil does not mean running out of oil.  It does mean running out of cheap oil.

Colin Campbell of the Association for the Study of Peak Oil & Gas (ASPO) has suggested that the global peak oil production occurred in the spring of 2004 at a rate of 23 billion barrels year.   A well trained and experienced oil geologist and current analyst suggests that global oil production peaked on December 16, 2005.³ Of the three largest oil fields in the world, two have peaked. Mexico announced that its giant Cantarell Field entered depletion in March, 2006, as did the huge Burgan field in Kuwait in November, 2005.  In April, 2006, a Saudi Aramco spokesman stated that its mature fields are declining at a rate of 8% per year and that the composite decline rate of producing fields is about 2%, thus implying that Ghawar, the largest oil field in the world may have peaked.

In 2005 the French Prime Minister was the first world leader to publicly recognize Peak Oil with his statement “We have entered the post oil era”. ⁴ In 2004, Alan Greenspan stated that the natural gas market peaked out.  In his 2006 State of the Union address President Bush has stated that we’re “addicted to oil”.

Traditional natural gas is also under the constraints of production peaks, which especially affect specific geographic regions because of the difficulty of transporting the resource over long distances.  Natural gas production may have peaked on the North American continent in 2003, with the possible exception of Alaskan gas supplies which cannot be developed until a pipeline is constructed.  Natural gas production in the North Sea has also peaked.  UK production was at its highest point in 2000, and declining production and increased prices are now a sensitive political issue there.

Hubbert’s world and U.S. peak oil predictions and U.S. peak natural gas predictions, all made in 19565  appears below in graphic form:

Gas is an oil substitute so as oil prices increase, so do gas prices.  Nuclear energy substitutes for gas produced electricity and this is why the likelihood of long term sustained increases in the price of oil will correlate with long term increases in the price of Uranium. 


The Efficiency of Nuclear Energy⁶:

In his 1956 paper, Hubbert in fact predicted that nuclear energy would take over as a key substitute for fossil fuels.  Sufficient uranium is available through exploration, to provide large amounts of energy for civilization. 

Nuclear energy as produced by the fission of Uranium nuclei.  The fissionable elements, as indicated in Table 1 below are the two uranium isotopes U-235 and U-233, and the Plutonium isotope Pu-239.  Of these, only one, U-235, occurs naturally and the other two are man-made, Pu-239 being derived by a radioactive transformation from U-238, and U-233 from thorium.  The isotopes, U-235, U-233, and Pu-239, are known accordingly as fissionable or fuel materials; whereas U-238 and Th-232, while not themselves fissionable, can be converted into fissionable isotopes and so are known as fertile materials.

Naturally occurring uranium consists of the isotopes, U-238 and U-235, in the ratio of 140 to 1. Any given quantity of natural uranium contains 99.3 percent of U-238 and 0.7 percent of U-235. Natural thorium consists of the single isotope Th-232.

Spontaneous fission of U-235 occurs when a concentration of this isotope greater than some critical amount is brought together. If the reaction is uncontrolled, the result is the explosion of an atomic bomb; if properly controlled, the energy, in the form of heat, can be released at a determinate rate. Nuclear piles comprise assemblages of fissionable and auxiliary materials for maintaining controlled nuclear reactions. 

NUCLEAR ENERGY SOURCES

ENERGY RELEASED BY FISSIONING OF URANIUM

In nuclear power generation U-235 in a critical amount undergoes fission.  When a U-235 atom is struck by a neutron, it breaks into fragments known as fission products which consist of other atoms near the middle of the table of atomic numbers, and also releases neutrons which strike other U-235 atoms, thereby maintaining a chain reaction. Each fission releases, on the average, 200-million electron volts of heat which, like the heat of combustion of coal or oil, can be used to drive a steam power plant.

Table 2 above shows how efficient nuclear energy is compared to oil.  One gram of U-235 is equivalent to 13 barrels of oil.  One pound of U-235 is equivalent to 6000 barrels of oil.


How about Other Energy Sources?:

Coal is abundant and cheap.  It is the major producer of electricity.  However, coal is very dirty environmentally.  Coal’s burning produces greenhouse gasses and therefore may cause global warming, and also produces the major pollutant sulfur dioxide.  Hydrogen as a source of energy is now far from proven as a viable energy alternative.  Various sources of Hydrogen (natural gas, coal) will produce greenhouse gases.  Further, electrolyzing water to produce hydrogen is three times as expensive as obtaining hydrogen from coal or natural gas.   Other sources, such as solar energy, geothermal energy, and wind energy, can in the near term only be of minor significance in satisfying the growing energy needs of civilization.


Conclusion:

Uranium prices will likely continue to grow as a result of increased world demand for energy, the increasing price of carbon fuels, concerns about the greenhouse affect, and the difficulty of finding sufficient amounts of oil.

1. The peak oil concept is described in detail in the book: Kenneth S. Deffeyes, Beyond Oil - The View from Hubbert’s Peak (New York: Hill and Wang, 2006), and in the article: Campbell and Laherrere, The End of Cheap Oil, Scientific American, March 1998.  In 2004, Alan Greenspan

2. The methodology behind his analysis was summarized in a paper by Hubbert which was published in 1982: M. King Hubbert, “Techniques of Prediction as Applied to the Production of Oil and Gas,” in S.I. Gass, ed., Oil and Gas Supply Modeling, Special Publication 631 (Washington, D.C.: National Bureau of Standards 1982), pp. 16-141.     

3. Kenneth S. Deffeyes, op. cit.

4. Association For the Study of Peak Oil and Gas, Article 611, October 2005.

5. M. King Hubbert, Nuclear Energy and the Fossil Fuels, Publication No. 95, Shell Development Company, Exploration and Production Research Division, Houston, Texas, June 1956 and Drilling and Production Practice (1956) American Petroleum Institute.