Is Water the New Gold?

People and water.

People need water to survive. And there are going to be approximately 3 billion more of them by the end of the next generation (@30 years). That is an almost 50 percent increase in population.

The amount of available water on the planet is not expanding at that rate. Or any rate. It is, in all likelihood contracting. Both because more people are using it - and because they are polluting existing stocks at the same time.

An additional factor is the increase in usage. Americans use water the way they use gasoline - with heedless abandon. The average American drinks, flushes, sprays, showers and wastes about 150 gallons a day.

The average Chinese? About 23 gallons a day. But as in so many other things, they are catching up - and determined to do so. Which is nice for them, not so nice for the environment or for future availability.

Markets, however, may provide a partial solution, though not one that will be acceptable to many. Because the markets have begun to notice, as the following article explains, that there is going to be a shortage. And where there is a shortage, there is often opportunity. But the opportunity does not come from altruistic impulses to solve the world's problem. It comes from the chance to find or convert more water (from sea water or polluted water, for instance)and then to charge people or their governments for it.

Given what we have seen in other realms of corporate behavior, there will be ethical issues tied to distribution and pricing. Some may be resolved through negotiation, but some, no doubt, if things get ugly enough, through expropriation. Whatever the final outcome may be, demand is not going to lessen. And neither is the opportunity or the threat. JL

Paul Farrell comments in MarketWatch:

“Is water the gold of the 21st century?." Answer: Yes, water is the New Gold for investors this century.

In 2010 global water generated over a half trillion dollars of revenue. Global world population will explode from 7 billion today to 10 billion by 2050, predicts the United Nations.
And over one billion “lack access to clean drinking water.”

Climate and weather patterns are changing natural water patterns. And industrial pollution is making water a scarce commodity. So the good news is that huge “opportunities exist for businesses that can figure out how to keep the pipes flowing.”

Yes, it’s a hot market. So, expand your vision for a minute. How many bottles of water do you drink a week? How much did you use for a shower? When you flushed a toilet? Wash your car? Cooking? Lattes? And my guess is your city water bill’s gone up in recent years.

So ask yourself: What happens in the next 40 years when another three billion people come into the world? Imagine adding 75 million people every year, six million a month, 200,000 every day, all demanding more and more water to drink, to shower, to cook, to everything. All guzzling down the New Gold that’s getting ever scarcer.

Population, the explosive driver in the demand for ever-scarcer water
Now here’s the real scary stuff, the investor’s basic multiplier. In the 12 short years leading up to 2011 the world added a billion people. China’s population is now 1.3 billion. Plus they’ll add another 100 million in the next generation, while India adds 600 million according to United Nations experts.

China’s already planning as many as 500 new cities to house all their new folks. Imagine, 500 new cities each housing 100,000 or more people, and that’s just for half of China’s projected growth to 2050, all demanding more water. The numbers are overwhelming.

Today Americans use 150 gallons a day, compared with 23 gallons in China. But they’re catching up, just check out any panoramic travel photos of China’s beautiful megacities, Shanghai, Beiiing, Guangzhou. And read about skyrocketing sales of Ferraris, Cartier watches, Gucci handbags and luxury goods in China. China has its own version of the American Dream!

Seriously, just a few decades ago China was an emerging country, a bit backward, not a global economic threat. But change is happening at light speed. Soon their GDP will overtake ours.

India expects their water demand to double in one decade while Fortune says “expanding populations will also swell demand for agricultural water some 42% by 2030,” in two decades.