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Up and Away: The Market for Helium, Retaining the Government's Strategic Reserve

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Most people know helium as the gas that makes balloons float and your voice sound like Donald Duck s. What most do not understand is how crucial this nonrenewable, finite natural resource is to our economy and national security. The 90-year old helium market has, at different times, been dominated by the government as a monopoly supplier, a monopsonist buyer, or a regulator. However, over the past decade, the government has been in the final stages of a long helium privatization effort. This paper will describe how the market for helium functions, and, as a result of this analysis, will recommend that the U.S. Government reverse its decision to sell the nation s strategic helium reserve. Before we begin, let s first examine the characteristics of this crucial and unique gas. Helium is the second element of the periodic table and is one of the most abundant elements in the universe, yet it is fairly rare on Earth. On Earth, the gas is found in only two places 1 as a byproduct of natural gas extraction at a few sites around the world, and 2 as a trace element in the atmosphere such that extraction at this time, and probably in the future, is uneconomical, as noted by Z. Cai, et al., of Cambridge University, in their 2007 report, Modeling Helium Markets. Helium s unique properties make it an essential ingredient for electronics, medical devices, industrial application, and cutting-edge research and development. For the U.S. Government, helium is critical in space, defense, and advanced energy systems there is no substitute if temperatures below minus 429 degrees Fahrenheit are needed. Since 2003, the private sector price for helium has increased by more than 100 percent, according to a U.S. Geological Survey fact sheet.

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  • Economics and Cost Analysis
  • Inorganic Chemistry

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