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Will water become more valuable than oil?

Three experts argue whether or not water might one day be more expensive than the fuel that powers the global economy.

05 Oct 2018

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This article first appeared in the Times on 22 September 2018.

With oil prices rising sharply this year, it seems remarkable to argue that water might one day be more expensive than the fuel that powers the global economy.

Yet Jean-Louis Chaussade, the chief executive of the French utility company Suez, whose activities straddle the energy and water sectors, argues that water scarcity is now one of the most pressing challenges facing many industries.

He told the Financial Times last year that he foresees a day when water will be a more precious commodity than oil.

It isn’t only a growing world population that places demands on water – industries such as energy and agriculture are also consuming more and more.

The 2030 Water Resources Group, a public-private partnership hosted by the World Bank, believes that by 2030 global demand will be 40 per cent higher than it is today – and that if action is not taken to curb the worst effects of climate change, water supplies will diminish.

The threat is now so acute that the Office of the Director of National Intelligence in the US recently warned that disputes over water have the potential to trigger armed conflicts, particularly in more arid areas of the world such as Africa and the Middle East. A three-year drought in South Africa prompted a water crisis earlier this year, with officials warning they may have to shut off most of Cape Town’s taps.

So we asked the experts: could water become costlier than oil?

Yes, it is true

Alexei Levene, Co-founder of Desolenator, a start-up that uses clean energy to desalinate water.

"The most valuable water in the world is what we actually consume; what we drink and cook with – potable water. With petrol at roughly £1.29 a litre in the UK today, a bottle of water from some of those big-name branded companies can already be about three times more.

"The most valuable water in the world is what we actually consume; what we drink and cook with – potable water. With petrol at roughly £1.29 a litre in the UK today, a bottle of water from some of those big-name branded companies can already be about three times more.

"The water we drink is not going to get any cheaper. Our 100-year-old water infrastructure is rapidly ageing, and problems associated with that are only getting worse. The days of relying on potable water flowing through our taps are coming to an end.

"Around the world, some 2.1 billion people do not have immediate access to clean drinking water. And this isn’t only a developing-world problem. In almost every country people have water stress – ranging from water scarcity in the American southwest to extreme drought concerns in Australia. Indonesia has up to three metres of annual rainfall, but very limited access to safe water to drink.

"Over the next ten years, if we do not come together to find answers to our water shortage, we will face major supply-related issues around the globe, not just with drinking water – our industries will be affected as well."

No, it’s not true

Charles Fishman, Author of The Big Thirst: The Secret Life and Turbulent Future of Water.

"In economic terms – literally, in terms of price – water will never cost more per gallon than oil. The US alone uses more water in three days than the world uses oil in a year. The quantities used, and the quantities available, are not comparable. And the economics aren’t comparable either.

"Price won’t be the issue. We won’t be carting water around in tankers from one part of the world to another. You can’t charge $1.55 for every gallon of water. The world economy would collapse. More to the point, you would never need to. You can produce water by cleaning and reusing it, or even desalinating it, much more cheaply than oil costs now. And the costs of reuse and desalination are falling.

"It’s fair to say that water is more valuable than oil as a commodity in non-price terms. Oil is a basic commodity for which there are many substitutes. That makes water more valuable, but this value is not reflected in its price.

"Communities and countries must appreciate that water is the foundation of their economies and invest much more in water systems. But water doesn’t need to be so expensive that ordinary people can’t afford what they need."

Tapping water’s potential - Schroders' view

Andy Howard, Head of Sustainability at Schroders, says investors must get to grips with the risks posed by water scarcity – and understand the opportunities.

"Water scarcity is absolutely an issue that should be on investors’ radars, but the answers aren’t straightforward. Water is a much more localised matter than, say, climate change, and the degree to which a company you might invest in is at risk of water shortage is not always clear.

"In practice, that means investors need to develop a firm understanding of the challenges that water shortages might present, and where these will bite. But they also need to think about what those issues might mean for an individual business.

"A drinks manufacturer, say, very obviously has an exposure to water, but not necessarily any more so than a business that uses water in its supply chain or its production processes.

"Still, it’s true to say that the value of water – or the cost of a lack of it – could be high enough to have a material impact on a business. We’ve already chosen not to invest in companies as we believed their exposure to water shortages was too big a risk.

"Equally, while water has so far been priced to reflect its basic necessity for life, we’ll need to find new ways to incentivise investment in water, and that will create new opportunities and value."

The value of investments and the income from them may go down as well as up and investors may not get back the amounts originally invested.

• Read more about how sustainability delivers long-term value in a fast-changing world. 

Published in partnership with The Times Newspaper Limited. View the original article.


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