Insight into the Obvious is Rare
Water is the mystery molecule that has driven life for, well…, forever. Forever as in, any conscious observer ever alive to wonder about it has pretty much loved the stuff.
Still, as the one fish commented to the other when one swam into this new hard thing in their life, “that’s correct, it’s a dam, it is used to hold back the water.”
The stunned fowl mouthed fish, now with a slightly confused head, asks, “but what’s water?”
Seeing the Unseen
Water provision is an invisible technology; even more hidden in plain sight than electricity. The obvious statement that water shortages can occur in places with high rainfall, jars with some people, doubtful of the original source and location of where their on tap water is stored and processed before being pumped to their door. Our association with our personal experiences with water lead us to believe the universality of this experience.
While 70% of the earth’s surface is covered in water, 97% of it is salt-water, which is unfit for human use. This ubiquitous salt-water cannot be used for drinking, crop irrigation or most industrial uses as while salt-water does not cause rusting itself, it does speed rusting up, corroding some metals and poisoning land were it accumulates.
Of the remaining 3% of the world’s water resources, only about 1% of it is readily available for human consumption. This one percent is found in our underground aquifers and resting on the land in groundwater sources found in streams, ponds, rivers, lakes and dams.
The flip side of this is the expanding population on the world, now about 7.4 billion people in 2016, and growing. The resulting increase in industrialisation and agriculture have contributed to worldwide water shortages. To name but a few areas that have experienced recent water shortages include China, Egypt, India, Israel, Pakistan, Mexico, parts of Africa and the United States (Colorado, California, Las Vegas and the East Coast). That is a large swath of the planets population, with a thirsty demand.
Common pollution worldwide also highlights the increasing demand for clean water. In the U.S., the dead zone off the Gulf Coast is strongly linked to the impact of fertilizer run-off, and methyl tertiary butyl ether (MTBE), an additive in unleaded fuel, can be found in well water from California to Maryland.
Overseas, highly publicised incidents in Russia, China, West Africa and elsewhere demonstrate that pollution isn’t limited to the West. Of course, fouled water supplies further limit the amount of fresh water available for human consumption. Already about half of all countries currently have to rely on desalination for at least part of their freshwater consumption needs.
The Essence of Guilt Free Consumption
There are ethical questions on whether this essential good should ever be commoditised and traded in the market. With precious few governments under legal obligation to guarantee minimum daily water rights. It is foreseeable that the very essence of pure, water, is tainted in the consumers mind with the knowledge that somewhere in the world a fellow citizen goes without. Literally without water. The morel equivalent to murder.
And this “somewhere” else raises one further battle, how will you actually be able to transport any commoditised water, and does water trapped in food count? Perhaps a broker in London could sell his underlying liquid commodity to a local farmer and then trade the bushels of corn the next season. The reality is the abstract nature of derivatives will probably be all that will be traded any any thriving water market. The shear quantity of water needing to be transported, being a limiting factor.
Perhaps we will be sending oil tankers, after their European delivery of the black gold from the Middle East, back to reload, but now filled with the now commoditised clear gold. Now doubt the oil residue might taint this water with a bitter taste in the mind.
Cheap as Chips and Twice as Nice
So clean potable water is expected to become a relatively more scarce resource as the human population grows, but it is still relatively cheap when getting it wholesale, unless you need it yourself at wholesale volumes as in agriculture and industry. This increasing shortages for it makes you have to compete with these alternate uses. As supply drops the rivalry in alternate uses drives the price up. This structural driver will probably ultimately force the commoditisation of water, irrespective of culture demands or the imposition of minimal daily water rights.
If properly implemented and regulated, this trade will ultimately deliver a more efficient pricing of this scarce resource just like it does with oil and gold.