WORLD WATER
has not made a convincing argument that it is a global commodity let alone a tradable and investable asset. Futurology is inherently dangerous. Forecasters
predict continuation of existing trends and miss the disruptive technologies and turning points that remake the world. Disruptive technologies and turning points are impossible to predict precisely because they are so unexpected and revolutionary. No one can know what the world will look like
in 10 years let alone 25-30 years. Go back 25 or 30 years to 1981 or 1986 and the Soviet Union was still a superpower, Ronald Reagan and Margaret Thatcher were still fighting the unions, Paul Volcker was struggling to tame inflation, and the widespread take up of the Internet was still 10-15 years into the future. But it is a fair bet water will never be traded
around the world in tankers and on futures exchanges. There will never an integrated global spot market in water let alone complex derivatives. It does not have the right characteristics to be a global commodity, let alone asset. For any plausible water price, the value-to-
volume ratio would be too low to support an integrated global supply system. There will not be an integrated global supply system for the same reason there is no global market in bread but there is in oil, copper and gold. It is not worth transporting loaves around the world by boat, plane and truck. Moreover, most of the value in water lies not in
the commodity itself but the value added to it by various processes and services. The world has so much water it will never
be in short supply at a global scale. There are literally oceans of the stuff as well as enormous amounts of brackish water underground. The value-added lies in extracting it, treating it to make it drinkable, extracting salt from sea water, transporting it to the place where it can be used conveniently, and disposing of dirty water to prevent the spread of disease.
The world has so much
water it will never be in short supply at a global scale
There is not much extractable value in the water
itself. In contrast, the market for water-related services (treatment, desalination, distribution, waste water collection and disposal) is interesting. But mostly because it is a state regulated utility that can earn guaranteed utility-type returns for investors, allowing them to tap into strong demand growth with minimal investment risk. Utility-type
September 2011 83
Page 1 |
Page 2 |
Page 3 |
Page 4 |
Page 5 |
Page 6 |
Page 7 |
Page 8 |
Page 9 |
Page 10 |
Page 11 |
Page 12 |
Page 13 |
Page 14 |
Page 15 |
Page 16 |
Page 17 |
Page 18 |
Page 19 |
Page 20 |
Page 21 |
Page 22 |
Page 23 |
Page 24 |
Page 25 |
Page 26 |
Page 27 |
Page 28 |
Page 29 |
Page 30 |
Page 31 |
Page 32 |
Page 33 |
Page 34 |
Page 35 |
Page 36 |
Page 37 |
Page 38 |
Page 39 |
Page 40 |
Page 41 |
Page 42 |
Page 43 |
Page 44 |
Page 45 |
Page 46 |
Page 47 |
Page 48 |
Page 49 |
Page 50 |
Page 51 |
Page 52 |
Page 53 |
Page 54 |
Page 55 |
Page 56 |
Page 57 |
Page 58 |
Page 59 |
Page 60 |
Page 61 |
Page 62 |
Page 63 |
Page 64 |
Page 65 |
Page 66 |
Page 67 |
Page 68 |
Page 69 |
Page 70 |
Page 71 |
Page 72 |
Page 73 |
Page 74 |
Page 75 |
Page 76 |
Page 77 |
Page 78 |
Page 79 |
Page 80 |
Page 81 |
Page 82 |
Page 83 |
Page 84 |
Page 85 |
Page 86 |
Page 87 |
Page 88 |
Page 89 |
Page 90 |
Page 91 |
Page 92 |
Page 93 |
Page 94 |
Page 95 |
Page 96