Markets: Long of Oil, Short of Helium

Just as I was about to write about the long side of markets, I read about the latest twists and turns in a fascinating story on the short side of things: a potential global helium shortage. And yes, I fought long and hard against the urge to use a pun in the title…‘helium market deflates’… ‘helium worries balloon’…’helium market blowing up’ ….etc, etc, etc.

The long side subject I was initially off on a tangent about was the speculative positions in crude. According to CFTC data, WTI saw non-commercial (speculative) positions reach a record high level in recent weeks  – coinciding with the recent high of $108.

But as Fed taper fears have tapered optimism, these positions have been unwound somewhat, and WTI prices have eased lower from near the highs of the year. As for Brent crude, further support from geopolitical tension on seventeen different fronts has meant that speculative longs for Brent have reached a record high in the latest data out earlier this week.

But it’s the short side of the story – a potential global helium shortage – which has re-piqued my interest this week. The story goes that the US has been stockpiling helium in ‘The Federal Helium Reserve’ (no, really) – an underground reservoir near Amarillo – since it was built in 1929. There is also a processing plant and 450 miles of pipelines. The US produces about 75% of the world’s helium, with half of that stored in the aforementioned reserve.

federal helium program

The problem is that Congress passed ‘The Helium Privatization Act’ in 1996, which stated that the government would effectively end sales from the reservoir once its debt was paid off. And this is expected to happen in, um, early October.

You wouldn’t think this would be a problem given that helium is the second most abundant element in the universe. But it is. There is a global shortage already. Although helium is abundant, it is not economically feasible to capture and extract it from the atmosphere. Hence the only helium captured is what is extracted as a byproduct of natural gas.

The need for helium is also much more wide-ranging than just for balloons. It plays a vital role in the production or operation of everything from MRI machines to fiber-optic cables to flat-screen TVs.

Congress returns to Washington next month, and if it doesn’t renege on the Act of 1996 and continue to fund ‘The Federal Helium Reserve’, the ‘fiscal helium cliff’, is coming in October.

In keeping with this theme, I leave you with a final image – of my cuz Paul (featured on the burrito before in the post ‘6 degrees of separation from my cousin Paul to the underwear indicator’, and in his Christmas attire too)…and my mum. The long and short of it indeed…..have a great weekend!