That makes sense. If the US government is selling it cheap, those who purchase from the US and other holders have the incentive to hold on to their helium til later when the price returns to normal. You're right.
Oil is a good example. That's why embargoes don't work. The target country just has to buy it through a third party to defeat the embargo. Embargoes can really only work when the country embargoed is shooting itself in the foot with price controls, as we did in the 70s.
So What? The US is a supplier of helium. The US may get out of the market. Prices will rise until other suppliers expand output. Overall, in the long term, the helium market will work fine just like the other markets we dont need the US government to supply.
As far as I have understood it, the US government was selling off helium stockpiles cheaply for the last 20 years, and now the consumers aren't willing/able to pay prices high enough to encourage production to rise quickly enough...
Part of it is because the US government directed the reserve to sell Helium off to pay it's debt.
We were using Helium decades ago though, I'm not sure why the price has always been cheap enough to justify using it as a party favor. One would think it would follow a typical supply/demand curve at some point.
The U.S. government is selling large quantities of helium at below market prices, apparently (though I'm not sure what a below market price is...if they are willing to keep selling at that price doesn't it become the market price?).
The Helium Privatisation Act required the reserve to sell enough helium to pay off its debts by a given deadline, then close. The resulting glut has kept the price low.
I don't know why they didn't instead just sell the reserve in its entirety for the amount of the debt, or for more. If the goal was to get the government out of the helium business (a dubious aim, if it's really as strategic an asset as all that) that would have done the job immediately and eliminated years of market distortion. But I guess any upheaval that resulted would be easily tied to the government officials who were around at the time.
Helium is a byproduct of natural gas production ... Demand for helium has risen, driven particularly by Asia's booming manufacturing industry.
A cynic might wonder if a closing date known 19 years in advance was designed partly to ensure that American petrochemical industry had time to develop the infrastructure required to take maximum advantage of any price shock.
Economics classes for the next century are going to use this as THE textbook argument against government intervention in commodity markets. The US amassed a huge stockpile of helium. But it was clear helium was no longer of strategic importance, we signed the Helium Privatization Act to sell off the reserve.
This, ironically, put the US government directly in control of a helium cartel. The US flooded the market with helium for decades at a set price. Now the reserve is mostly sold off and it's a relative "free" market. But the bubble has burst, no more artificially cheap helium, and most buyers find themselves priced out. There will be an "adjustment" in many related industries.
isn't the helium shortage affected by the market price of helium?
just like we were afraid of peak oil until we broke through the price barrier to distilling oil from tar sands and suddenly there's plenty of oil to go around as long as people are willing to pay $80/barrel ?
The fungibility point is that it doesn't matter who the helium gets sold to, the price will be affected. It's like oil - it's all pretty much the same, so it doesn't matter whether you boycott Venezuela and specify that the oil you buy must come from Brazil rather than Venezuela, since that just means someone in Brazil will buy Venezuelan oil for you or a potential Brazilian customer would switch to Venezuelan. The oil flows where demand is.
> This is especially true when getting more is very difficult. The price is likely to go up in the future, making even more sense to hold on to it.
The price has to go up beyond the opportunity cost and one's discount rate. One doesn't invest in a merely profitable activity - one invests in the most profitable activity, and if that isn't bigger than one's discount rate one just consumes rather than invests.
If helium goes up 2% a year but Treasuries return 3%, then the savvier merchants will sell helium and buy Treasuries, and laugh at you all the way to the bank.
You could still make money at a larger scale (given a cheap enough storage facility): buy helium now, sell when more expensive. You'd have to wait. If you could buy the whole lot now, you could make the profit straight away.
If storing the helium plus interest rates actually costs more than the expected price increase over time warrants----then the US government _should_ sell off the reserve now, and the whole thing about them selling too cheaply is nonsense.
Though it might be that the US government can store helium cheaper than anyone else. In that case, perhaps they should sell the helium with the storage facilities? After all, what good are the storage facilities to them, when they've sold all the helium?
A neighbour of mine is a MRI hospital radiologist, it seems odd that instead of talking abou the price of fish there is much to discuss about the price of Helium.
This is HN; so is there any way market forces fix this?
Qatar is producing it, and most of the supply was down to the US government treating it as a strategic asset. Alas as ever, in liquidating their stores they depressed the price.
(I assume, I'm not a He broker)
> "Why would such a valuable resource be squandered? Basically, it's because the price of helium does not reflect its value. Most of the world's supply of helium is held by the United States National Helium Reserve, which was mandated to sell off all of its stockpile by 2015, regardless of price"
This doesn't make sense to me. If the market price doesn't reflect its value, why wouldn't somebody just buy up all the artificially cheap helium and stockpile it, to sell it at its "true" market value later?
We're still putting Helium in party balloons, after all. Why aren't all the "high value" users of Helium hedging for a time when Helium becomes more scarce? Is this really a market failure, or is there something missing from this narrative?
Oil is a good example. That's why embargoes don't work. The target country just has to buy it through a third party to defeat the embargo. Embargoes can really only work when the country embargoed is shooting itself in the foot with price controls, as we did in the 70s.
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