Why Did the Price of Uranium Skyrocket?

Between 2004 and 2007, the spot price of uranium more than quadrupled, reaching more than $140 before falling off sharply in the past several months to less than $80.

Why was there such a huge spike in price?

One reason is because there’s been an increased demand from nuclear power plants around the world, as nuclear energy becomes more palatable in the face of global warming. (We wrote here about that phenomenon.)

But if you watch this interesting Canadian TV interview, you’ll see that there’s an interesting supply side of the story as well as the demand side.

According to David Miller, C.O.O. of Strathmore Minerals, nuclear plants had, until recently, been living off a huge uranium stockpile from the 1980′s. That stockpile was created in anticipation of an onslaught of new U.S. nuclear plants that ended up never being built because of Jane Fonda political, regulatory, and public pressures. Now, says Miller, with that stockpile depleted, there’s a huge push for new uranium.

This doesn’t explain the recent drop in uranium price, of course, but it is hardly the only commodity that’s taken a hit.

On a broader and more important note, go read the excellent article in today’s Wall Street Journal headlined “New Limits to Growth Revive Malthusian Fears.” It ably wrestles with the recurring fear that the world’s resources and capacities have been outstripped by the number of people living here. Unlike many such articles, it is neither hysterical nor dismissive.

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  1. desmoquattro says:

    Steve I expect better from you…

    “One reason is because there’s been an increased demand from nuclear power plants around the world, as nuclear energy becomes more palatable in the face of global warming.”

    replace “global warming” in the statement above with fossil fuel prices and energy demands…

    there is no need to throw in the catch phrase “global warming” in order to make your posting anymore relevant… plus I, like many of your reader, are tired of the unwarrented GW talk anyway.

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  2. J. Saleh says:

    The reason Uranium prices rose is because Iran wanted to buy a stockpile and ended up paying more than the quadruple you mentioned- from the Russian blackmailers. The reason it decreased is because Iran finally got the Uranium delivered, when Puten needed money to stay in power, and after many many people got rich on bribes. So now there is no reason for the price to stay up. Not so freaky. Just human behavior mr. Dubner. In the future just look to see what Iran wants and then watch as the price goes up.

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  3. John says:

    I read an article in 2004 about the very same theoretical supply issue and went out and bought some stock in a Canadian uranium company, so it’s not exactly a new story.

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  4. Erikster says:

    Hmmm, this is starting to smell like oil, you know what I mean?

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  5. AlexW says:

    Could a possible counter-terror measure be to make Uranium so exorbitantly expensive that to use it in a weapon is just not worth it?

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  6. a student of Economics says:

    “nuclear plants had, until recently, been living off a huge uranium stockpile from the 1980′s….Now, says Miller, with that stockpile depleted, there’s a huge push for new uranium”

    That’s not rational economic behavior. Why would anyone sell or use the stockpiled uranium at the old lower price if they knew it was going to be gone soon and the price would then skyrocket? Rational behavior would be to hang on to it for later sale or use, which would automatically raise the short term price and lower the long term price so there would be no abrupt price shock. To be precise, arbitrage conditions for a storable, finite asset lead to its price steadily, smoothly increasing at the real interest rate (plus any storage costs).

    You need some sort of change in information, external shock, or irrationality to make your story work.

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  7. Erin K. says:

    @5:
    When governments regulate prices to such extreme levels (on par with making them entirely illegal, almost), the black market for said commodity will grow. The only way that this could work is if you had a universal agreement from *every* uranium company in the private sector to set prices equally–which is illegal in the first place–and entirely defeats the point of a free market, where competition for prices will lead to profit. Set prices high, either by private or government methods, and watch the energy costs in areas that get power from nuclear plants skyrocket, therefore defeating the whole purpose of having a nuclear plant in the first place, and leading to an excess of uranium with no buyers, making it even *more* accessible for the black market.

    And, those who would sacrifice essential liberties (even economic liberties) for increased safety deserve neither liberty nor safety.

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  8. Sarah says:

    I second the point raised in the initial comment. I do not dispute that the earth’s temperatures are changing (as they’ve done for, oh, forever). But there is a world of difference between factual shifts in temperature, and the media-fueled phenomenon of “global warming.” “Global warming” is a deceptively simplistic term, and its use imports a whole lot of misconceptions, commonly ignored uncertainties, and (irrational) emotional assumptions.

    It is irresponsible to throw around the term “global warming” as is done in the post. Find some other way to attract the attention of the masses. And if environmental concerns or changing conditions are in fact relevant, explain specifically how they are (or provide references). “Global warming” alone is misleading and tells us nothing – except perhaps that you don’t actually know what you’re talking about.

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