THE ERA OF CHEAP WATER IS OVER ----By Shan Saeed

This article comes at a time when UN senior economist appreciated my work and partially agreed with me that water has become a commodity now. Mehri Madarshahi working at United Nations reached out to get my strategic insight about water resources and how to preserve it for the future generation. Here is my insight about water.” THE ERA OF CHEAP WATER IS OVER” Water economics is fast changing and if not preserved, water crisis can lead to global wars and acrimonies issues going forward. Water and oil prices will be moving neck to neck in the next 2-years.

WHEN the word water appears in print these days, crisis is rarely far behind. Water, it is said, is the new oil: a resource long squandered, now growing expensive and soon to be overwhelmed by insatiable demand. Aquifers are falling, glaciers vanishing, reservoirs drying up and rivers no longer flowing to the sea. Climate change threatens to make the problems worse. Everyone must use less water if famine, pestilence and mass migration are not to sweep the globe. As it is, wars are about to break out between countries squabbling over dams and rivers. If the apocalypse is still a little way off, it is only because the four horsemen and their steeds have stopped to search for something to drink.

The language is often overblown, and the remedies sometimes ill conceived, but the basic message is not wrong. Water is indeed scarce in many places, and will grow scarcer. Bringing supply and demand into equilibrium will be painful, and political disputes may increase in number and intensify in their capacity to cause trouble. To carry on with present practices would indeed be to invite disaster.

Major water price increases and supply cuts are underway in many parts in the USA, which is long overdue. Water is becoming a scare resource and consumption patterns are rising fast. In China water prices have gone up by 37% in the last 3-years. Africa is waiting for the clean water. Africa is turning in a desert island with no pure water available for the masses of 1 billion inhabitants according the research done by Mckinsey and Bain in 2011. If you think that the upcoming energy shortage is going to be bad, it will pale in comparison to the next water crisis. So investment in fresh water infrastructure is going to be a great recurring long term investment theme. One theory about the endless wars in the Middle East since 1918 is that they have really been over water rights.

I think “The era of cheap water is over”. Call it peak water, if you like, but the water economics is getting expensive. It is due to with respect to housing and economic development, long disconnected from reality, is finally on its way back to somewhere appropriate — if mostly because there is no choice.

Why? The difficulties start with the sheer number of people using the stuff. When, 60 years ago, the world’s population was about 2.5 billion, worries about water supply affected relatively few people. Both drought and hunger existed, as they have throughout history, but most people could be fed without irrigated farming. Then the green revolution, in an inspired combination of new crop breeds, fertilisers and water, made possible a huge rise in the population. The number of people on Earth rose to 6 billion in 2000, nearly 7 billion today, and is heading for 9 billion in 2050. The area under irrigation has doubled and the amount of water drawn for farming has tripled. The proportion of people living in countries chronically short of water, which stood at 8% (500m) at the turn of the 21st century, is set to rise to 45% (4 billion) by 2050. And already 1.7 billion people go to bed hungry each night, partly for lack of water to grow food*

*Sources

World Bank Reports 2011

FAO Report

UNESCO

Financial Times

Economist magazine

Deutsche Bank

Citibank report

Bloomberg

Wall Street Journal

According to the Economist magazine, people in temperate climates where the rain falls moderately all the year round may not realise how much water is needed for farming. In Britain, for example, farming takes only 3% of all water withdrawals. In the United States, by contrast, 41% goes for agriculture, almost all of it for irrigation. In China farming takes nearly 70%, Malaysia requires 77%, and in India nearer 90%. For the world as a whole, agriculture accounts for almost 70%.

Farmers’ increasing demand for water is caused not only by the growing number of mouths to be fed but also by people’s desire for better-tasting, more interesting food. Unfortunately, it takes nearly twice as much water to grow a kilo of peanuts as a kilo of soyabeans, nearly four times as much to produce a kilo of beef as a kilo of chicken, and nearly five times as much to produce a glass of orange juice as a cup of tea. With 2 billion people around the world about to enter the middle class, the agricultural demands on water would increase even if the population stood still.

Industry, too, needs water. It takes about 22% of the world’s withdrawals. Domestic activities take the other 8%. Together, the demands of these two categories quadrupled in the second half of the 20th century, growing twice as fast as those of farming, and forecasters see nothing but further increases in demand on all fronts. According to my French/Lebanese fashion designer friend Rola Ezzedine, countries should avoid wasting water by adopting new technology for water preservation. Water is life and more conscience effort is required to get the voice heard globally.

The guru of water management said: We're fast draining the fresh water resources our farms rely on, warns Lester Brown, president of the Earth Policy Institute. What will happen if we carry on as we are now? Civilisation as we know it can't withstand the stresses of continuing with business as usual. It has got to move, almost on a war footing, to cut carbon emissions, eradicate poverty, stabilise population. It must also restore the economy's natural support systems: forests and aquifers and soils. No civilisation ever survived that kind of destruction; nor will ours. The world haven't gone over the edge, but we're much closer than most people think. If the heatwave that hit Moscow in 2010 had been centred on Chicago instead, USA would be in deep trouble. The Russians lost 40 per cent of their 100-million-tonne grain crop, but USA would have lost 40 per cent of our 400-million-tonne crop - a massive global setback.

How can we avert a disaster like this?

In many countries, irrigation water is free or comes at a low price, so it's treated as an abundant resource. In fact it's scarce and should be priced accordingly. It must also redefine what I mean by "security". The real threats are not some armed superpower but water or food shortages, climate change and the rising number of failed states. Food and water security are vital for countries and economic survival for many nations.

Disclaimer: This is just a research article and not an investment advice. All financial transactions carry a RISK.