# Understanding Nonrenewable Resources: Definition, Features, and Examples

![Nonrenewable Resource](https://www.investopedia.com/thmb/rdsuTSuKw8PnPg-Nh3S8iqzicg4=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/nonrenewableresource--45c79b3da26d4bd0bf7e7ee1ad82c4a5.jpg)

*— Investopedia / Zoe Hansen*

## What Are Nonrenewable Resources?

Nonrenewable resources are vital yet finite elements extracted from Earth, essential for energy production and various industrial applications. Unlike renewable resources, which replenish naturally and sustainably, nonrenewables like fossil fuels—oil, natural gas, and coal—are consumed at a rate faster than they can be replaced, leading to environmental concerns and economic implications. This article delves into the definition of nonrenewable resources, their characteristics, and examples, illustrating their significant role in global energy consumption and the challenges they pose for sustainability and climate change.

Additionally, explore why transitioning towards renewable alternatives is becoming increasingly critical in this era of environmental consciousness.

### Key Takeaways

*   Nonrenewable resources are natural substances, such as fossil fuels and uranium, that exist in finite amounts and cannot be replenished at the rate they are consumed.
*   Fossil fuels like crude oil, natural gas, and coal provide approximately 80% of the world's energy but contribute significantly to environmental pollution and climate change by releasing carbon dioxide.
*   As nonrenewable resources become scarcer, their extraction costs are expected to rise, pushing societies toward more sustainable renewable energy sources like solar and wind power.
*   Contrary to nonrenewable resources, renewable resources such as sunlight, wind, and water are abundant and sustainable, leading to increased investment and usage, especially with governmental incentives supporting their development.
*   The historical affordability of nonrenewable resources is challenged by their declining availability, highlighting the urgent need for a transition to alternative energy sources to reduce environmental impact.

  

## The Nature and Extraction of Nonrenewable Resources

Nonrenewable resources are extracted from the Earth, often from the ground or mines, and took billions of years to form. Since they can't be replaced quickly, they are finite. Humans extract these in gas, liquid, or solid form and convert them as needed.

Crude oil, natural gas, coal, and uranium are nonrenewable resources processed into commercial products. For example, the fossil fuel industry extracts crude oil and converts it into gasoline and petrochemicals used in products like plastics and solvents.

Some types of groundwater are considered nonrenewable resources if the aquifer is unable to be replenished at the same rate at which it's drained.

Most societies rely heavily on nonrenewable resources for energy, with about 80% of the world's energy coming from fossil fuels. This strains supplies and significantly impacts the environment, as burning fossil fuels releases carbon dioxide, contributing to [climate change](https://www.investopedia.com/articles/investing/051514/preparing-your-portfolio-climate-change.asp).  

> **Important**
>
> In economic terms, nonrenewables are valuable resources that can't be replaced as quickly as they are consumed.

## Comparing Nonrenewable and Renewable Resources

Renewable resources are abundant and sustainable, making them easier to find and replace than nonrenewable ones, which can be depleted.

The sun, wind, and water are the most common examples of renewable resources. Others include lumber (which can be replenished through planting), the earth's heat (geothermal), and biomass.

The call to use renewable resources, especially as energy sources, is becoming more common. That's because our dependence on and consumption of nonrenewable resources is causing a rapid decline in supplies and leading to climate change. Clean energy, like solar and wind power, replenishes naturally and is environmentally friendly.

> **Important**
>
> What about metals and minerals that come from the Earth, such as gold, silver, and iron? These may be nonrenewable or renewable resources, depending on who you ask. They can fall into the former category because they are extracted from the Earth. But some people consider them renewable and sustainable because they are abundant and can be used and recycled.

## Exploring Fossil Fuels as Nonrenewable Energy Sources

Fossil fuels are all nonrenewable. But not all nonrenewables are fossil fuels. Crude oil, natural gas, and coal are all considered fossil fuels, but [uranium](https://www.investopedia.com/financial-edge/0411/4-clean-energy-alternatives-to-uranium.aspx) is not. Rather, it is a heavy metal that is extracted as a solid and then converted by nuclear power plants into a fuel source.

All of these nonrenewable resources have proved historically to be valuable [energy sources that are inexpensive](https://www.investopedia.com/terms/e/energy-return-on-investment.asp) to extract. Storage, conversion, and shipping are easy and cheap.

Fuels created from nonrenewable resources are still the primary source of all the power generated in the world due to their affordability and high energy content.  

## The Rise of Renewable Energy: Challenges and Opportunities

As nonrenewable resources become scarcer, their costs will rise due to supply and demand, potentially leading to unaffordable prices and a shift to [alternative energy sources](https://www.investopedia.com/the-best-energy-stocks-8781579).

Concerns about fossil fuels' environmental impact and climate change contribution are growing. The [Kyoto Protocol](https://www.investopedia.com/terms/k/kyoto.asp) in 1997 and the 2015 Paris Agreement are pivotal treaties where parties committed to reducing greenhouse gas emissions.

The alternatives to fossil fuels require ample lead time to be put into place. That process has begun slowly. Wind power generated about 6.3% of American electrical power in 2017 and was the source of about 8.4% in 2020. In 2023, wind energy provided 10% of total electricity nationwide, including more than 60% of the power in Iowa and 40% in South Dakota, Kansas, and Oklahoma.

## Benefits of Investing in Nonrenewable Energy Sectors

There are a few specific, unique benefits of investing in nonrenewable resources. These benefits are not meant to be an exhaustive list, but investing in nonrenewable resources may result in the following:

*   **Potential for Profitability:** Investing in nonrenewable resources such as oil, natural gas, and minerals can be highly profitable due to their scarcity. They also may be profitable because they play a role in various industries worldwide. The limited supply of these resources, coupled with potentially persistent global demand, means investors may be able to capture price increases over time (especially if demand for that resource grows). Consider how the global oil markets are expected to increase by 800,000 barrels per day in 2024.
*   **Potential for Stability and Predictability:** Nonrenewable resources can offer a level of stability and predictability that can be attractive to investors. For example, consider how engrained oil and gas are in our society. Even though supply can fluctuate and emerging technologies may be moving us away from as much consumption, the world is still heavily reliant on certain resources. In turn, the demand for certain nonrenewable resources may remain steady even during [economic declines](https://www.investopedia.com/terms/r/recession.asp) (especially if they are used for essential, non-elective reasons). The same report as above from the Department of Energy shows the spot price of crude oil is forecast to hover between $80 and $100 through the end of 2025.
*   **Continual Global Demand:** Another advantage of investing in nonrenewable resources lies in their global presence. For instance, some public companies may only cater to clients in the United States. Meanwhile, nonrenewable resources may be sourced from emerging markets and used around the world. For investors not wanting to lock into certain specific economies, nonrenewable resources could be an international investment that spans geographic borders. OPEC expects an increase in production from the United States, Canada, and Brazil, for example.

## Challenges and Risks in Nonrenewable Energy Investments

There are also some downsides to keep in mind when considering investing in nonrenewable energy:

*   **Environmental and Social Impact:** One significant disadvantage of investing in nonrenewable resources is their detrimental environmental and social impacts. Extraction and processing of these resources can lead to deforestation, habitat destruction, water pollution, and [greenhouse gas emissions](https://www.investopedia.com/us-companies-greenhouse-gas-damage-study-7853027). Political stances aside, these activities may contribute to climate change and harm the health and livelihoods of local communities. Investors must balance financial implications with potential non-financial outcomes. 
*   **Volatility and Price Uncertainty:** In the advantages section above, we talked about stability as an advantage. Unfortunately, nonrenewables may also come with high levels of volatility and uncertainty. Nonrenewable resources can be subject to significant price volatility due to geopolitical tensions, changes in global supply, technological advancements, and regulatory shifts. For instance, though we discussed growth in the section prior, the International Energy Agency still notes that the growth rate is slowing.
*   **Growing Costs:** When investors think of nonrenewable energy, they may think about higher revenue due to the limited supply of a good. However, as that resource has a smaller and smaller supply that can be extracted from Earth, extraction costs may exponentially increase. This may mean the net margin of nonrenewable energy may fluctuate or even diminish if it becomes too difficult to affordably extract that resource. In addition, [legislation](https://www.investopedia.com/terms/l/legislativerisk.asp) like amendments to the Fluid Mineral Leases and Leasing Process rule increase leasing costs.
*   **Technological Advancements:** We touched on this in a bullet above, but investing in nonrenewable resources raises concerns about long-term sustainability due to changes in technology. As society considers alternative ways of doing things and comes up with more modern solutions that rely on renewable energy sources, nonrenewable energy faces long-term obsolescence in favor of more efficient solutions.

## Investing in Nonrenewable Resource ETFs: Options and Considerations

There are plenty of ETFs that invest in nonrenewable resources. In addition, many ETFs invest in companies associated with the extraction and deployment of those resources. Some examples of these ETFs include: 

*   **SPDR S&P Oil & Gas Exploration & Production ETF (XOP):** XOP tracks the performance of companies engaged in the exploration and production of oil and gas. It includes a broad range of firms involved in upstream activities within the energy sector.
*   **Energy Select Sector SPDR Fund (XLE):** XLE is one of the largest ETFs focusing and includes major integrated oil companies, refining and marketing firms, and exploration and production companies.
*   **iShares U.S. Oil & Gas Exploration & Production ETF (IEO):** IEO tracks the investment results of an index composed of U.S. equities in the oil and gas exploration and production sector. It focuses on companies involved in the discovery, extraction, and production of oil and natural gas.
*   **VanEck Vectors Oil Services ETF (OIH):** OIH invests in companies that provide services to the oil industry, such as drilling, equipment, and infrastructure. It includes firms involved in oilfield services, equipment, and oil drilling.
*   **SPDR S&P Oil & Gas Equipment & Services ETF (XES):** XES focuses on companies that provide equipment, services, or technology to the oil and gas exploration and production industry. It includes companies involved in drilling, equipment manufacturing, and services.
*   **VanEck Vectors Unconventional Oil & Gas ETF (FRAK):** FRAK tracks the performance of companies involved in the exploration, production, and distribution of unconventional oil and gas, including shale oil and gas.

## What Defines a Nonrenewable Resource?

Nonrenewable resources are derived from the Earth— in a finite supply that can take billions of years to replenish. Historically, many nonrenewables have been relatively cheap to extract. But as their supply continues to diminish, the cost of this extraction may rise in price, leading customers to use alternative sources, such as solar and wind energy.

## What Are the Different Types of Nonrenewable Resources?

Among the most common examples of natural resources are crude oil, coal, uranium, and mineral sources such as gold. One subset of nonrenewable resources includes crude oil and natural gas. Both of these substances are made out of organic carbon material, depending on the form it takes after heating and compressing over time. Another form of nonrenewables is minerals, which include gold, silver, and iron. Unlike crude oil and natural gas, these are quite difficult and expensive to extract. Meanwhile, different types of groundwater are nonrenewables when they do not replenish at their draining speed.

## How Do Nonrenewables Differ From Renewable Resources?

Since nonrenewables, by definition, will diminish in supply over time, the law of supply and demand suggests that their [price will continue to rise](https://www.investopedia.com/terms/h/hotellings-theory.asp). Renewables, by contrast, have an infinite supply. However, at the same time, the cost and time required to establish them will be lengthy. More recently, demand for renewables has grown in tandem with governmental incentives, with many of their costs decreasing over time. Solar energy is one prime example of this trend.

## How Do Nonrenewable Resources Affect Climate Change?

Humans depend heavily on fossil fuels like crude oil, natural gas, and coal to supply energy. Burning these commodities release carbon dioxide into the atmosphere. This is the primary greenhouse gas that contributes to climate change. The more fossil fuels we burn, the more gases build up. This warms up the climate and causes shifts in the atmosphere, in the water, and on the land.

## What Are Some Examples of Renewable Resources?

Renewable resources are those whose supplies are abundant and can be easily replenished. Unlike nonrenewable resources, they are considered to be sustainable. Examples of renewable resources are the sun, wind, water, heat from the Earth, and biomass.

## The Bottom Line

Fossil fuels are normally the first thing most people think of when they hear the word nonrenewable resources. Collectively, these are resources that come from the earth. They are extracted and converted for human consumption, usually as energy sources. What sets them apart from renewable resources is that their supplies are finite, and they aren't considered sustainable because of the damage they do to the environment.

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>     
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>     
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>     
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>     
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>     
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>     
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>     
> 8.  International Energy Agency. "[Oil Demand Growing at a Slower Pace as Post-Covid Rebound Runs Its Course](https://www.iea.org/commentaries/oil-demand-growing-at-a-slower-pace-as-post-covid-rebound-runs-its-course)."
>     
> 9.  U.S. Department of the Interior. "[Interior Department Finalizes Action to Ensure Fair Return to Taxpayers, Strengthen Accountability for Oil and Gas Operations on Public Lands](https://www.doi.gov/pressreleases/interior-department-finalizes-action-ensure-fair-return-taxpayers-strengthen)."