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Why water will become the world’s most important asset


“Water will eventually become the single most important physical commodity-based asset class, dwarfing oil, copper, agricultural commodities and precious metals”.

That was economist and ex-Bank of England MPC member Willem Buiter more than six years ago. You could say he was a bit early in his forecast. While water is vital for life, it hasn’t so far become the planet’s most-wanted asset.

But as I examine today, this could be only a matter of time…

Tewkesbury’s taps turn off

Let’s start at home. The UK receives less rainfall per person than our northern European neighbours. The South East of England is the most water-stressed part of the country, with London actually drier than Istanbul (believe it or not!)

Meanwhile, our national demand for water is high and rising. Every Brit uses about 150 litres of water a day, up 1% each year since 1930, according to Waterwise. Yet we’ve always taken it for granted that when we turn on the taps, water will flow.

But imagine if our supplies soured – or even dried up completely.

Impossible? Just ask the 10,000 citizens of Tewkesbury. Last weekend they were without water for more than 48 hours after a supply pipe burst.

It boils down to this; a global water shortage is looming. And increased investment is sorely needed to ensure continued adequate global supply…

Water, water, everywhere and not a
drop to drink…

We’re always hearing about wealth inequality, but worldwide water inequality is just as severe. OK, 70% of the earth’s surface is covered by water. But some 97.5% of this is non-potable seawater, i.e. it’s salty and unfit for human consumption.

Desalination – removing the salt – is both complex and costly. Of the potable percentage, a large chunk is locked up in polar ice caps and glaciers. Only 0.5% of the planet’s total water resources are available for freshwater uses, says Water for the World.

Fewer than 10 countries possess 60% of this.

Worse, natural groundwater reserves are running out. Some 30% of the planet’s potable water lies in deep underground aquifers (gravel and sand-filled reservoirs that took nature many millennia to create). It’s extracted for agricultural, private and industrial uses, often at highly unsustainable rates.

21 out of 37 of the world’s major aquifers, ranging from India and China to the US and France, are receding as their water is used faster than it’s replenished.

India is the world’s largest consumer of groundwater. It uses an estimated 230 cubic kilometres of the stuff every year – over a quarter of the global total. But 54% of India’s groundwater wells are shrinking.

At current rates, in 20 years about 60% of all India’s aquifers will be in a critical condition.

60% of European cities with more than 100,000 people have used groundwater much faster than it can be replenished, says Water for the World. Indeed, “the water table is dropping all over the world”, says senior NASA water scientist Jay Famiglietti. “There’s not an infinite supply of water.” 

Pollution is a growing worldwide worry. In China, most river water in the country’s major cities is ‘unfit for human contact,’ according to official government data.

And there’s another major concern: The sector’s infrastructure is dire. Global pipes, cleaning plants and sewer systems are in disrepair with the US losing 6bn gallons of treated water a day just from leaky pipes. Rectification costs have deterred the level of infrastructure spending that’s needed. Indeed, obsolete distribution systems waste more than 40% of the total global water supply, says Water for the World.

Water demand will surge

In contrast, demand for water is set to surge.

Since 1940 the global population has doubled, but overall water use has quadrupled. 1.8bn people have no fresh water access and 2.5bn people need better sanitation.

As economists Daniel Grossman of West Virginia University and David Slusky of Kansas University commented in a recent study, “failure to provide safe drinking water has large health implications”. 

Assuming no horrendous natural disasters or the advent of WWIII, the planet’s population is set to rise much more.

Just over 7.5bn people presently live on the planet. Estimates vary, but UN predictions of the human population reaching 8.6bn in 2030, 9.8bn in 2050 and 11.2bn by 2100 are widely accepted as plausible.

Rising living standards translate into more water-intensive accommodation. And richer consumers eat more meat, whose production also requires more water.

More people are moving to mega cities that are growing faster than ever before, in emerging economies in particular. 54% of today’s world population lives in urban areas and that’s expected to grow to two-thirds by 2050, according to a 2014 UN report.

Right now, agriculture accounts for 70% of global freshwater use. If the world population rises in line with UN forecasts, food production will need to grow by almost 70% by 2035 to provide enough sustenance.

In summary: global water demand has been forecast by the OECD to grow by 55% between 2000 and 2050.

It’s all about the price

The problem is, in fact, the solution. The price we place on water is just plain wrong.

“Globally, water is seriously undervalued”, says Leah Schleifer at the World Resources Institute. “Its price does not reflect the true, total cost of service from transport via infrastructure treatment and disposal. This has led to…lack of investment in infrastructure and new water technologies that use water more efficiently. When the price of receiving clean water is closer to its actual service cost, efficient water use will be incentivised.”

So, to reflect its future scarcity, the price of fresh water must rise. Australia, the world’s most developed water market, led the way in introducing tradable ‘water rights’ to allocate resources more efficiently. Other countries such as Chile, South Africa and the US have followed suit.

Rising prices would also encourage countries with the most surplus water to maximise their resources, eventually benefiting water-poor nations.

Producing more potable water or of preserving existing supplies via recycling and conservation would become a large and fast-growing international business. As part of this process, the world needs a proper fresh water market.

Willem Buiter has also forecast a massive increase in investment in the sector, including the construction of more storage, shipping and transportation facilities.

So, the question now is: what’s the best way to prepare and invest in water?

Over at Strategic Intelligence we’ve got some ideas for you.

To find out more about us, click here.

Daily Reckoning

14 Comments on "Why water will become the world’s most important asset"

  1. Boat on Wed, 20th Dec 2017 3:45 pm 

    If you want to fight climate change the lack of water will do the trick. Those who cannot afford water will find walls keeping them from migrating. No money=no profit=no food. Does the major die off start in 20 years?

  2. deadlykillerbeaz on Wed, 20th Dec 2017 5:21 pm 

    Every year I treat my well to sanitize the water in the casing. You determine how much water is in the casing and treat the water with the proper amount of bleach. The volume of water in the casing will determine how much bleach to use.

    You circulate the water for an hour back into the well casing. You have to make sure any little critters don’t contaminate your well. After the recirculating, you pump the bleach treated water out onto the ground for another hour. Have to have your well water tested for any bacterial infestation.

    You won’t fail the water test when you treat your well.

    Any agricultural university will have information and instructions.

    Nestle has already invested in water. Buy Nestle stock.

    Utilities are interested in water and a utility bought a water services company several years ago now.

    Been there, done that. Never too late for the party.

  3. onlooker on Wed, 20th Dec 2017 6:07 pm 

    Welcome to the time of consequences. Consequences to 7 plus billion devouring humans. And when money cannot shield from want and scarcity

  4. Makati1 on Wed, 20th Dec 2017 6:29 pm 

    Boat, the “major die off ” in the US will start the first year after the crash/collapse. It has the least flexible financial/supply system in the world now. JIT deliveries will be history. Imports of necessities will be on hold or gone forever.

    When the SHTF, the US will become isolated from all of it’s supply lines as it will have nothing of value to trade, even for necessities. Nor will the serfs have anything to trade that anyone else will want. The supply system will break down.

    Think about it Boat. Stop the internet and what happens? Close the ATMs/banks and what happens? Close the gas stations and what happens? The grocery shelves will be empty in a few days, never to be refilled. 70+ million drug users will be looking for their next fix, AND most of them will be armed.

    Most Americans are in La La Land and not even aware of what is coming and that is how their masters want them to be. The Great Leveling is gaining speed. Prepare, Boat.

  5. Makati1 on Wed, 20th Dec 2017 6:33 pm 

    BTW: Water will never be a problem in the Ps. Manila gets almost two meters annually, evenly spread over the year and the Pacific side gets over three meters per year. Our farmhouse will have running water, gravity fed, as long as it is needed. In fact, it gets too much water. Water management will be the biggest problem, not scarcity.

  6. deadlykillerbeaz on Wed, 20th Dec 2017 7:06 pm 

    Yeah, Mad Kat, that foxhole you have dug for a farmhouse will fill up with rain water every time it rains on your quarter acre paradise. lol

  7. Hello on Thu, 21st Dec 2017 6:38 am 

    >> nothing of value to trade

    Are you sure Mak? But what if the philipinos need any gadget more complicated than a hammer? You know, anything more complicated than they can make themselves. What are the Ps going to do then? I mean they could trade of course, but what do the Ps have to trade? Nothing. Wait, they have something. I think they are hoarding trash in their bays at sea.

  8. Sissyfuss on Thu, 21st Dec 2017 7:48 am 

    I live in Michigan surrounded by 5 of the greatest lakes imaginable. My concern is when the Southwest becomes uninhabitable due to CC either the pipelines will be constructed posthaste or a line of moving trucks will stretch from Phoenix to Chicago. President Grifter, build that wall! Only site it a little more Northerly.

  9. joe on Thu, 21st Dec 2017 9:40 am 

    If they make water expensive for each person to use say $5-6 per gallon then society can’t sustain that. 1000 gallons is a couple of bucks, double that price (half the supply) and western society living standards suffer horribly. Back to the once a week bath for the wealthy and once a month for rest, and the cost of food…..

    Water, like everything is going to peak either in demand or supply cause there is simply too many people. If we ‘build that wall’ all we will do is build our coffins. There might be no solutions to this problem, fundamental economics has to kick in at some point, we learned that in 2007/08, trillions of £/$ later we still haven’t bought our way out of the Great Recession.

  10. Antius on Thu, 21st Dec 2017 10:33 am 

    The problem is that water is directly tied to food production. Globally, humans use 100 times more water to irrigate crops than for personal uses. Peak water means peak food. Peak food = peak population, whether it has finished growing or not.

    ‘Food and agriculture are the largest consumers of water, requiring one hundred times more than we use for personal needs. Up to 70 % of the water we take from rivers and groundwater goes into irrigation, about 10% is used in domestic applications and 20% in industry.’

  11. Apneaman on Thu, 21st Dec 2017 3:23 pm 

    2017 was a terrible year of climate disasters — and too many media outlets failed to tell the story

    “From hurricanes to heat waves to wildfires and beyond, 2017 has been a terrifying year of disasters in the U.S. And too many media outlets have missed a key part of the story: These aren’t just natural disasters; in many cases, they’re climate disasters.
    Some wildfire coverage explored the climate angle, but much of it didn’t

    Even before vicious wildfires tore through Southern California in December, the state had experienced its worst-ever wildfire season, which many scientists said was likely worsened by climate change.”—-and-too-many-media-outlets-failed-to-tell/218890

  12. Sissyfuss on Thu, 21st Dec 2017 6:01 pm 

    Aptknee, President Grifter has already threatened to revoke the licenses of networks for reporting ” fake news.” What do you think he will do if they start reporting on hoaxes?

  13. Apneaman on Thu, 21st Dec 2017 6:36 pm 

    Sissyfuss, I guess it depends on whose hoax it is.

    That ‘trickle down’ hoax has been propagated yet again. This time it was Trump & his Cancer crew trying to sell it. I don’t know why they even bother to bullshit anymore. It’s not like anyone will stop them from passing whatever legislation is left that is in the way of the corporate state domination of everything.

    They should deify the POTUS like the Romans did with emperors and Egyptians did with pharaohs.

    I mean if they can magically turn corporations into people and have the plebes buy it, why not POTUS Gods?

    They could erect a big sphinx outside the White House with Trump’s head on it.

    The Cheeto Sphinx – Oh how the sunlight dazzles and sparkles when it hits that magnificent orange hair.

    They could make a tourist attraction out of it. The same people who go to the creation museum and the Ark will come in droves.

  14. Apneaman on Fri, 22nd Dec 2017 11:13 am 

    Clean water that is…..

    One million people have caught cholera in Yemen. You should be outraged.

    I’m not outraged.

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