Water will be a more valuable commodity than oil
Demand issues mean that only big business can finance the improvements needed in water management and infrastructure to meet the world’s future supply needs
It’s only a matter of time before water becomes a traded commodity like oil, gold and silver. When demand exceeds supply, business steps up to find a way to meet that demand. But to do so it will faces massive costs. As a result the market will have to set a price for life’s most precious commodity.
According to the UN 40% of the world’s population will be living with water scarcity by 2035. Population growth, increased agriculture and industrialisation will propel the world’s need for fresh, clean water to 55% higher than today’s supply levels by 2050.
In an attempt to stem increasing demand, governments are preventing industries using underground sourcing. They’re forced to invest in desalination or waste water recycling plants to meet needs.
However, this will not solve the problem, it just delays the inevitable – that demand is increasing beyond current supply capabilities.
High transportation costs
One of the biggest supply issues is the cost to transport it. It’s more expensive to pipe than oil. And while the world is steadily weaning itself off its dependency on oil, it’s dependency on water is insurmountable – without it we die.
It’s viewed as a basic human right and the responsibility for distribution has been in the hands of government. However, this has resulted in misuse and exploitation. At the same time government has failed to sufficiently invest in infrastructure which multiplies the supply problem.
Approximately $22 trillion needs to be invested in water infrastructure over the next 20 years to meet current supply levels. The markets can play a role in finding the huge sums needed.
Fortune magazine has predicted that water is set to determine the wealth of nations in the 21st century, mirroring the impact oil had on some countries in the 20th century. It may even lead to water rich countries like Brazil, Russia and the US forming a cartel in the same way oil rich countries combined to form Opec.
Will the poor suffer?
The fear with turning it into a tradeable commodity is that the world’s poor will suffer as the market will demand economic efficiency. However, the greater fear is that demand continues to outstrip supply, and the issue of water shortage increases unchecked forcing government to implement more drastic solutions.
One of the key skills successful traders use to make profits is to identify trends in supply and demand.
Trading water rights is already happening in Australia and parts of the US. You can be sure that Wall Street is trying to figure out how to make it a globally traded commodity.
Identifying trading opportunities is at the heart of making profits. FXB Trading prides itself in being able to read the market and identify trends.