Via
MR, are helium party-balloons the next commodity to spike? Apparently helium, which cannot be made synthetically or chemically, is subject to a
serious market pricing distortion:
The US government established a national helium reserve in 1925, and today a billion cubic metres of the gas are stored in a facility near Amarillo, Texas. In 1996 Congress passed an act requiring that this strategic reserve, which represents half the Earth's helium stocks, be sold off by 2015. As a result, helium is far too cheap and is not treated as a precious resource.
Nobel prizewinner Robert Richardson thinks the government should
Get out of the business and let the free market prevail. The consequence will be a rise in prices. Unfortunately party balloons will be $100 each rather than $3 but we'll have to live with that. We will have to live with those prices eventually anyway.
I would love to understand the political reasons why this happened - the economic illogic is patently apparent, and I can't imagine it does much for national security either.
Even absent government action, isn't there an arbitrage opportunity for people to purchase the helium at the gov price and store it?
ReplyDeleteIn theory, yes, although 1), I don't know how difficult or costly it is to arrange for storage of non-trivial quantities of helium, and 2), an arbitrageur would be locking up a lot of capital and the time horizon is quite long (government will be selling through 2015), so annualized returns might not be that great.
ReplyDeleteThat said, if Richardson wants to put his money where his mouth is, that would be a great way to do it...