While visiting a family member at the hospital, I stopped by the gift shop to buy a balloon and a “get well” card. I grabbed a card but there
Despite the dramatic response, this answer piqued my interest. Surely, there is a ReasonablEconomics answer to all of this. The cashier asked, “Where does helium come from anyway?” It was at that moment that I realized I knew nothing about helium. I chuckled and offered, “My guess is that it comes from the ground and that the shortage is a result of the trade war with China. These days, we can just blame the shortages on China.”
Naturally, I looked up what was going on with helium and I figured I’d share my basic findings.
Helium: What is it good for?
Well, surprisingly more than just party balloons. Helium, being a super non-reactive gas, is used to keep other gases from wylin’ out when they are close to each other. To keep space shuttles from blowing up, helium keeps hot exhaust gases and oxygen separated. Similarly, arc welders use helium as a shielding gas to keep the work area safe.
Helium is very cool—literally. It is used in cryogenics for its ability to cool things down to less than minus 450 degrees Fahrenheit. (And, I thought Nebraska was cold!)
Without helium, the internet would not be what it is today. Because of its unparalleled cooling properties, it is used in the production of semiconductors which go into fiber optic cables and virtually all of our digital devices. The military uses tons of helium in their missiles, leak detection, underwater gear, and much more!
Heard of an MRI? Yeah, helium is a necessary component to the diagnosing of cancers, tumors, strokes, heart damage, and brain diseases. It literally saves lives.
Importantly, helium has also provided countless people (mainly kids) several minutes of laughter with its ability to change the gas molecules in their vocal tracts. This, of course, increases the speed of the sound of their voice making them squeak ridiculously.
So, is there a shortage?
Apparently, yes. Despite the cashier’s complaint, Party City is also experiencing the effects of heliums dip in supply.
Now for the longer why:
According to GasWorld consultants, shortages of helium are not a surprise to those in the industry.
Helium is the second most abundant gas in the universe, right after hydrogen. However, on Earth, it’s actually pretty scarce. I was wrong about the supplier: most of the crude and refined helium comes from the United States as a small by-product of natural gas.
Helium production and sales have been mostly managed by the Bureau of Land Management, within the Department of Interior. When the United States figured out that 1) helium was not a renewable resource, and 2) that the U.S. had a bunch of natural gas (subsequently, helium)-rich lands, it created a stockpile of helium at the National Helium Reserve in Amarillo, TX. Importantly, the “market price” of helium was completely dictated by the U.S. Department of the Interior.
The Helium Privatization Act of 1996 called to sell the government stockpile of helium to pay back the debt it accrued from storing it in the first place. The problem is that when they started to sell off the stockpile, they were selling it at a surprisingly low price, given its relative scarcity.
The low price was great for commercial sales, but not good enough for producers of helium to go out of their way to find new and innovative ways of extracting more helium.
Few Producers and No Substitutes
Since then, Qatar has come into the picture as the second-largest producer in the world. Qatar provides roughly 25 percent of the world’s helium.
In the summer of 2017, Qatar shut down two of its helium plants due to a boycott from Saudi Arabia (neighbors on the southern border). This shut down reduced the global supply of helium for a little while, causing an increase in the price of helium.
Despite the recent fiasco in the Persian Gulf, helium production has stayed relatively consistent. Demand for helium, though, continues to increase. When it comes to its cooling properties and non-reactivity, helium has no substitutes. The science, engineering, and technology community continues to grow and they are finding more ways to put helium to use. But, due to it being simply a (tiny) by-product of natural gas, production will only increase at the rate natural gas producers produce the natural gas. To adjust to the increased demand, natural gas producers would have to increase production by a ridiculous amount, the helium market finds itself in a bit of a conundrum.
Hope for the future
Given that a handful of producers are in charge of supplying the world’s helium, it’s no surprise that the market can’t adjust to shifts in demand. Fortunately, there is a newly discovered giant deposit of helium in Tanzania that is not trapped in natural gas. It’s trapped underground with a bunch of nitrogen. A new company, Helium One, was formed to tap into that gas. If all goes well, this new supply of helium should not only invite other producers to come into the helium game but can offer a much-needed cushion to the market.
If we let the price mechanism do its thing, helium will continue to be allocated to its highest valued use and, hopefully, we’ll have floating balloons and squeaky voices soon.