Peak Helium

19 November 2007



Helium Shortage Mirrors Oil Market

The entire world is aware of the fact that crude oil is scarcer than it used to be. There is another commodity that has seen its price soar as demand has risen, and increasing supply isn't readily possible. Despite being the second most abundant element in the entire universe, there is a helium shortage on planet Earth that can't keep up with increasing demand from scientists involved in superconductor research, medical practitioners, manufacturers of flat-panel TVs and party planners who fill balloons with the stuff. The response of producers and consumers mirrors those in the oil market.

First, helium is produced by drilling into the ground just like natural gas. NYSE listed Air Products has just announced it is setting up production in Riley Ridge Field in Wyoming, the second largest helium-rich natural gas field in the United States. At the same time, there is a huge reserve in Texas owned by the US government. It was started back around World War I when dirigibles were thought to be the coming thing, and it has been the biggest source of supply since. This reserve will be empty in another 10 years. Think of this reserve as a parallel to the OPEC cartel, and one has a pretty good idea of how it operates.

Second, demand has soared. Bob Secter of the Chicago Tribune wrote recently, “demand for the gas has taken off in industry and scientific research in recent years, and the helium squeeze is being felt everywhere from university physics laboratories to plants in India, China, Taiwan and Korea that make today's hottest consumer products. Japanese helium suppliers recently warned customers in the electronics industry to prepare for supply cuts of up to 30 percent.” He also wrote, “A standard tank with enough helium to blow up 400 average-size balloons cost $40 five years ago but $88 today . . . [and consumers] expect a 50 percent price increase before Christmas.” New applications and more customers result in heightened demand, which puts prices through the roof. The parallel with the oil market again is obvious.

The response of customers is also similar. Those at the bottom, the balloon crowd, are finding other ways to make their balloons float. One party organizer in Chicago to whom Mr. Secter spoke mixes her helium with nitrogen in a 60:40 blend. Cindy Cronin said, “They still float, but not as long.” Gasohol, anyone? Nitrogen as ethanol?

Leslie Theiss, manager of the Federal Helium Reserve near Amarillo, observed that new sources of helium in the Middle East haven't developed as hoped, and the private sector hasn't filled the gap that his operation is leaving. “To our knowledge, nothing has been discovered to date that has the reserves we have here,” she said. “Exports have increased 50 percent in the last five years. If you've got a finite amount and a lot more suddenly starts going overseas, do the math. It's not going to be good when we're done here.” Plus ça change, plus c'est la même chose.

© Copyright 2007 by The Kensington Review, Jeff Myhre, PhD, Editor. No part of this publication may be reproduced without written consent. Produced using Fedora Linux.

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