waterAs Jo-Shing Yang writes in a 2008 Alternet article, “Water is often dubbed ‘the new oil’ because of its similarity to oil: diminishing supplies and rapidly growing demand worldwide.”

Does that seem far-fetched?

In the United States, the entire Colorado River Basin is running low on water. In California, over half the state is experiencing “exceptional” drought conditions (the highest rung of the 5-tiered drought monitoring system), and its three-year drought may be just the beginning. Scientists say there is an 80 percent change that the American Southwest will experience a 10-year drought in this century. Overseas, China’s breadbasket is suffering its worst drought in 50 years and São Paulo, which is located just next door to the Amazon rainforest, is experiencing its worst drought in 84 years.

What’s Happening?

In 2001, the CIA estimated that by 2015 nearly half the world’s population would be living in “water-stressed” countries. Already, 1.1 billion people on the planet don’t have enough water and, according to Yang, 2.6 billion don’t have adequate sanitation.

Climate change is making this situation more extreme. Yang also writes that the genocide in Darfur was triggered by a drought-induced desertification that has lasted since the 1980s. The resulting competition for resources amongst tribes – grazing lands and water rights – led to conflicts that “eventually exploded into a full-blown genocide backed by a racist, genocidal ideology.”

Not too long ago, Andrew Liveris, CEO of DOW Chemical Company told The Economist that, “Water is the oil of the 21st century.” It’s becoming a scarce commodity, and that makes investment appealing.

So appealing, in fact, that Goldman Sachs, JP Morgan Chase, Citigroup, UBS, Deutsche Bank, Credit Suisse, Macquarie Bank, Barclays Bank, the Blackstone Group, Allianz and HSBC Bank are all buying up as many acres of aquifers, lakes and watersheds that they can. George H.W. Bush, Hong Kong’s Li Ka-shing, Manuel V. Pangilinan and other billionaires are also investing in water utilities, water rights and shares in water technologies.

“Wall Street appears well aware of the investment opportunities in water supply infrastructure, wastewater treatment, and demand management technologies,” goes one JP Morgan equity research document.

In 2011, Citigroup’s Willem Buitler said that water will eventually be more valuable than oil: “Water as an asset class will, in my view, become eventually the single most important physical-commodity based asset class, dwarfing oil, copper, agricultural commodities and precious metals.”

Today, water is even used to obtain more oil. Hydraulic fracturing, also known as fracking, requires 3-5 million gallons of water per developed well, and Citigroup recommends water-rights owners prioritize selling to frackers over farmers, which will pay $3,000 per acre-foot as opposed to $50 per acre-foot for farmers.

But water is different from oil in one key respect. As Wenonah Hauter, executive director of the nonprofit group Food and Water Watch, explains, “Free-market theory works great for discretionary consumer purchases. But water is not like other commodities—it’s not something people can substitute or choose to forgo.”

So who will own the water of the future? More importantly, how much will you have to pay to get it?

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3 Responses

  1. hikesocal says:

    Well, if you'd like to take a walk in to the Belly of the Beast to see the "solution," this is a good place to start.

    This clip of the Chairman of Nestle explaining that water should not be a human right makes the rounds every few months.

    He's subsequently backed off the position but as the head of the world's largest bottled water producer I think the bullshit meter has been turned on.

    His water perspective begins at about 2:00. The rest is about food security. Good thing we have people like PETER BRABECK looking out for us, huh?


    Thanks PE. I feel better now.

  2. victedy says:

    A minister in my religion (who died 20 year ago) 'prophetically' said to me: forget oil there will be wars over water in the 21st century.

    I was sickened what was going on with India's water http://www.indiaresource.org/campaigns/coke/
    it reminded me of the corn that was grown in India and exported to Britain, leaving the Indians to starve.

  3. JimmyCrowe says:

    Investment banks like Goldman Sachs are always one step ahead of the crowd..

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