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Michael Baxter

The most valued commodity in the world is set to suffer from falling supply

Written by: Michael Baxter on June 5th 2013

Category: Thought for the day

It isn’t oil. Today I am fretting over peak something else. For investors, this is an opportunity, and I refer to water.

You may recall that last year Jim Rogers said: “Agriculture is going to be the big thing in the next 20 years. The best thing you can do is to become a farmer, that is where the money is going to be made. It has been a disaster for the last 20 years, but farmers are going to be driving the Lamborghini in the next 20 years, stock brokers are going to be driving taxis. The smart ones will learn how to drive tractors so they can work for the smart farmers. Anything to do with agriculture — seeds, tractors, fertilizer, water — is going to be extremely profitable over the next 20 years.”

He may well have a point, but actually maybe water, which is even more fundamental than agriculture, will be the next big thing.

A couple of weeks ago the great and the good in the world of water science descended on Bonn, for the Global Water System Project conference.

This is the communiqué published by the conference organisers after the event had finished: “In the short span of one or two generations, the majority of the 9 billion people on Earth will be living under the handicap of severe pressure on fresh water, an absolutely essential natural resource for which there is no substitute. This handicap will be self-inflicted and is, we believe, entirely avoidable.”

The report also said: “Humans typically achieve water security through short-term and often costly engineering solutions, which can create long-lived impacts on social ecological systems. Faced with a choice of water for short-term economic gain or for the more general health of aquatic ecosystems, society overwhelmingly chooses development, often with deleterious consequences on the very water systems that provide the resource.” See: The Bonn Declaration on Global Water Security.

On a slightly more positive note, the communiqué said: “Sustainable development requires both technological and institutional innovation. At present, the formulation of effective institutions for the management of water lags behind engineering technologies in many regions.”

The truth is that we have no choice, but to start spending a lot more money on ways to improve water conservation and on technologies to help us obtain fresh water in a more sustainable way. I am guessing that technology and know-how relating to water desalination will become more valuable. Who knows, maybe here in Blighty, where the weather has been awful of late, we will find we have a valuable resource we can export to the rest of the world.

One of the issues relating to water is transporting it. The cost of pumping it uphill, for example, or inland, away from desalination plants is currently prohibitive.

One idea that may yet come into its own is vertical farms. Vertical farms as you may recall, are those that are built in layers one on top of another, like a block of flats, but instead we get a block of fields. There are technological problems with this idea, namely the issue of lighting, and how you supply light to plants that are lower levels. But one thing vertical farms do offer is very efficient use of water.

The nightmare scenario is that we do not come up with a fix, and indeed anthropogenic global warming, if you believe in it, threatens to exacerbate future water shortages.

In the medium term I worry a tad about India and China, and Tibet. The rivers that flow from this region irrigate much of the land in the world’s two most populous countries. I can’t help but feel that the desire to obtain water security lies at the heart of China’s policy in Tibet. What will happen when India and China are the two richest countries on earth, and argue over this common source of water? Predicting causes of future conflict is a mug’s game, and at the risk of being accused of being a mug I would say this is the single biggest potential cause of a major conflict later this century.

What can investors do? Invest in water technologies, and as a long term plan, live somewhere wet.

These views and comments are those of the author alone and do not necessarily reflect the view of The Share Centre, its officers and employees

Tags: Global Water System Project, Invest in water technologies, Tibet fresh water China India, vertical farms

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