Constant Demand: Opportunities in Supply Side Fentanyl Interdiction

The demand for fentanyl in the United States is not dropping. The drug is too powerful, and users will always chase the next high. However, constant demand for any good presents an opportunity to create supply chain disruptions and the US needs to start viewing fentanyl trafficking this way. It gives us the opportunity to put resources against the supply of fentanyl with the goal of pricing users and middlemen out of the market. Knowing demand will stay constant lets us use interdictions to control the prices. This is an untapped opportunity that will save lives. This is the second part in a two-part series on the fentanyl crisis and the national security threat it poses. The first installment explored past national security threats to the US and how it responded. Those responses contrast sharply with the momentum behind combatting the fentanyl crisis. Please read the first part here . In 2023, Customs and Border Protection (CBP), an operational component of the US Department of Homeland Security (DHS), seized 27,022.3 pounds of fentanyl at the US border. Two milligrams of fentanyl will kill you so one pound will kill 226,796 people . The 27,022.3 pounds is enough to kill 6.1 BILLION people . That sounds like a lot, but is it? One of the problems in assessing supply and demand in the counternarcotics world is that there are no first principles. We cannot say with any level of confidence that we’ve interdicted 27,022.3 pounds of an incoming 100,000. There are estimates, some well-informed, others less, that can give us indications of how much is coming, but we do not know with enough fidelity to make tactical or strategic decisions. Making matters worse, fentanyl is even harder to estimate because it is synthetic. For cocaine, we can see coca fields through overhead imagery in areas where it can and is known to grow. We know approximately how much cocaine one can get per plant so we can estimate the total cocaine production for a given year. Much like everything with fentanyl, nothing is as it was. We can count the illicit fentanyl labs we are aware of, but the approximate output is little more than a guess. If we are going to take a supply and demand approach, how do we make a difference if we have no idea what the supply is? Subscribe now Constant Demand We don’t know how much fentanyl is coming in, but we do know about the 27,022.3 pounds we interdicted in 2023. There are other indicators that can help us get some level of understanding such as naloxone dispensations, but this isn’t enough. Instead of trying to figure how much is coming in, we need to focus on what we know. We know that we stopped 27,022.3 pounds in 2023. According to a news report of a recent interdiction by the California Highway Patrol , the 11 pounds of fentanyl that were seized were worth $500,000. That means that 1 pound of fentanyl has a street value of approximately $45,000. At that price, the 2023 seizures were worth $1.2 billion cumulatively. The $45,000 per pound price point is significant because that accounts for the removal of $1.2 billion in supply from the market. And as any high school economics student knows, a reduction in supply when demand remains constant results in a rise in prices. This is the key. From the demand side of the fentanyl problem, the constant demand is a tragic problem that must be fixed. Lives are at stake. From the supply side, there is an opportunity to align interdiction resources in such a way that we create a macro-economically significant price shift in fentanyl. The name of the game is not the total weight seized but the macro-economic shifts in price that our interdictions affect. In that way, not all seizures are created equal. Pricing Out of the Market Across the US there are people doing incredibly important work addressing the tragic demand side of the fentanyl crisis. Funding for harms reduction, addiction treatment, and overdose treatments have been present in many communities for years. These facilities and programs do incredible work and are staffed by dedicated heroes. Those programs save lives, but only if people enter them. One way to make people enter them is by raising the cost of fentanyl to a level where they can no longer afford it. Critics may respond that this will cause addicts to engage in crime to feed their addiction. That is a possibility but not all addicts will choose this path. A second path to macro-economic impact is to impact the heroin and cocaine dealers who cut their product with fentanyl. Many fentanyl deaths are the result of people who do not know that the dose they are taking is laced with fentanyl. Pricing those individuals out of the market is also possible by impacting the supply. Macro-Economic Impact If seizing $1.2 billion in fentanyl in 2023 means the street price is $45,000 per pound, the economics imply that the street price would rise if the interdicted total rose by a given percentage. For example, if seizures go up to $2 billion, there will be an impact. That impact will be more pronounced at $3 billion or higher. This assumes a roughly equivalent demand, but the goal is to ultimately reduce the demand. The supply efforts should lead users into the demand efforts in the form of rehabilitation, harm reduction, and other treatment. But the macro-economic approach works on two fronts: Targeting users directly. Targeting dealers that use fentanyl to cut other drugs. Share Significant Interdictions One of the puzzles in fentanyl is that because it is so deadly, it would seem that any interdiction is a good one. If even two milligrams are seized, that’s enough to save a life. But the truth is that cartels have always been willing to give up small interdictions to turn attention away from the large interdictions. While it is worthwhile to get as much fentanyl off the street as possible, it is strategically more important to seize large loads, so they have macro-economic impact. For example, the CBP San Diego Field Office had seizures of the following quantities in 2022 (in pounds): 734 373 219 334 413 1,121 301 420 509 904 879 The sum of that total is 6,207 pounds (and that just counts the large loads, not the total). Just on these 11 seizures, $279,315,000 worth of fentanyl was taken from the total supply. Those are strategically significant loads. A Path Forward From 2021-2023, the year 2023 showed the highest total seizures by CBP. 2021: 11,202.5 pounds 2022: 14,700 pounds 2023: 27,022.3 pounds The average of those numbers is 17,641.6 pounds. That should become the benchmark against which we measure fentanyl seizures. At that average seizure weight, we can derive an average street price. This will have to be an informed guess but let’s assume it comes down to $40,000 per pound. That is our second benchmark. If total seizures over any given three-year period are not above 17,641.6 pounds, we have to assume our seizures are not raising to the level of macro-economic impact. If observed street price is not above $40,000 per pound, we know that we are unlikely to price users and dealers out of the market. This gives our interdiction forces an advantage. National Security Memorandum-24 directs the intelligence community to focus on counternarcotics collection giving our interdiction forces a better ability to find significant loads when they arrive. But our forces need all the resources they can get. They need to stay ahead of new movements in trafficking routes and that requires artificial intelligence (AI). AI is the key to finding the factors that will give our forces the advantage they need to make the significant interdictions that have macro-economic impact that price users out of the market. Our national, homeland, and economic security demands it. And the lives already lost are owed our very best. Leave a comment Connect with us: LinkedIn , Bluesky , X , Website To learn more about the services we offer, please visit our product page. This post was edited by Thomas Morin, Marketing Analyst at Frontier Foundry. View his Substack here and his LinkedIn here .