Tuesday, 24 August 2010

Peak helium?

At the ACT regional conference a while back David Round argued that we need to be seriously preparing for peak-everything, with the prices of oil and other commodities set to go through the roof and disastrous consequences sure to follow. As I was the speaker immediately after him, I opened by offering him there a bet:
Wager 1: If the price of a bundle of 20 commodities, chosen by David Round, grows in value by more than the S&P 500 over the next 20 years, Eric owes David $500. If not, David owes Eric $500. We will take the value of the bundle and of the S&P averaged over the five-year periods 2006-2010 and 2026-2030.

Wager 2: If world per capita GDP increases by less than 15% in real terms over the next twenty years, Eric owes David $500; otherwise, David owes Eric $500.
David is still choosing his bundle of commodities; I'll look forward to blogging the full details when things are settled.

But he might worry about adding helium to his portfolio. BK Drinkwater explains nicely:

And this brings me to the first in an occasional series: BK's Investment Tips.

Today's tip is: Helium! It's a lock!

An impending shortage means prices will go up. So stock up now while the Federal Helium Reserve keeps selling the stuff to you at Before Peak Helium rates. Those suckers are so stupid, they don't even realize that it's vital for the world's governments to stock up on non-renewable resources so as to ensure they never get used. All you have to do to profit: buy helium today at today's rates, and hold onto it until Peak Helium, when prices will skyrocket and you'll be richer than Rockefeller.

Of course, there are a few practical difficulties.

If you believe in Peak Helium, you should probably invest now, before everyone else catches on and drives the price up. Since everyone else should be doing the same, we should have seen some movement in the market already. We haven't. That kinda suggests you're out on your own.

There's no clearing house that covers helium futures, so you're going to have to go over the counter with Uncle Sam. I'm guessing that if you believe in Peak Helium, you're also convinced that the United States is a substantial default risk.

And since we're talking forwards now rather than futures, it might be a good idea to give some thought to where you might stick all that helium when it's delivered. If you can't think of anything, I have suggestions.

My point? Don't talk to me about Peak Helium, or Peak Metal, or Peak Oil, or Peak Anything Else until you've put your money where your mouth is. More gently, and paraphrasing a billboard on my street: there's probably no Peak [Insert Commodity Here], so stop worrying and enjoy your life.
The lock was a particularly nice touch.


  1. I believe in Peak Oil, I just dont care. It is a 100% certainty that the physical quantity of oil to supply human needs will eventually cost more to extract than an alternative technology like solar conversion for hydrogen fuel cells or algal production of biofuel.

    Whether that occurs before Peak Oil, or more likely after is simply irrelevant. Human ingenuity will ensure we adjust.

  2. We certainly survived peak whale oil; we'll survive this too.

  3. Agreed. I probably should have made explicit in my piece that I believe in "Peak Oil", at least in the sense that there will be some moment in time at which the rate of oil extraction will hit a global (um... global in the mathematical sense...) maximum.

    Thanks, Sage and Eric both, for handling that omission in a sympathetic way. I do appreciate it.

  4. @bk: I'd thought it obvious enough not to be worth worrying about.