Commodities Class: Final Exam...H2O
Greetings guys and gals,
Over the past week, we've shot the breeze about various commodities and our views on their near futures...but today I want to go outside of the proverbial box.
Today, I want to discuss an issue which the mainstream media and most so-called intelligentsia ignore with a passion.
TOPIC #7
Water
Debates have and will rage over whether water is a right or a commodity, but regardless of where you stand on the issue...one thing is for sure.
Supply rules over demand.
Simply by the merit of demand being meaningless, where there is no supply.
In spite of there being no right answer, there are many scientists hard at work trying to solve this problem.
How much water we really have is a point of great contention. But for the purpose of this exercise, let's hear how you guys would arrange a water commodity market...
What would be the market structure?
How would you trade it?
Delivery?
Storage?
Etc?
I've been meaning to ask the forum this question for quite a while. I am really curious if people are thinking about this as much as I am.
In a recent conversation with a respected academic for the first time in my life I heard the following words and I have to admit they made me stop and think...
All I am concerned with in my life time is ensuring my family enough wealth so that access to water is not a problem for them 50 years down the road.
Heavy stuff...
Before I put thought into how I would structure a water market, I would like to let you know that there are a number of water etfs that are expected to grow tremendously because of the lack of water supply. just a couple off the top of my head are pho and pio, check them out.
Great documentary called "Blue Gold" World Water Wars. Highly recommend it
There are several ETFs and a few public water companies to buy individually.
But buying water rights isn't, and will probably never be, openly traded on an exchange. Nevertheless, various people are still buying water rights in the private market. T. Boone Pickens has supposedly acquired vast amounts of water rights (presumably from the Ogallala Aquifer) for much of west Texas.
Ironic, though, a lifetime oil man buying water. Makes one kick the old water vs. oil quote through the neurons more than usual.
Key difference between oil and water (besides the fact that one is polar and one is non-polar).
Water is in fixed supply. We can increase water supply through desalinization plants. The only way to decrease water supply is to literally store it in barrels. Oil's supply dwindles with consumption (technically oil can be replaced but it takes a while for oil to produce itself naturally). When water is heated, it evaporates, but it maintains its chemical structure. Oil's composition changes. Thus, the two are very different.
Because water moves in cycles throughout the earth, its "consumable supply" (In other words, even though the total supply is fixed, only a certain portion is consumable at any moment in time), is determined by velocity. The faster we can convert waste water back into consumable water, the more we will have available.
As for demand, this is determined basically by demographics. http://ngm.nationalgeographic.com/2011/01/seven-billion/kunzig-text
Storing water would only work to exacerbate the problem. Taking water out of circulation would prevent it from actually being used and recycled, thus tempting more people to store water (and creating a feedback loop). Storage then requires higher velocity (which is dependent upon improving technology) in order to satisfy physical demand (plus, it is likely that speculative demand would also increase if water storage became popular).
Depletion of fossil water plus global warming melting key glaciers around the world, plus a 50% greater population by 2050...
(Not to mention huge debt levels in the developed world, energy scarcity, etc....)
Not looking like a pretty picture eh?
Despite what economists will have you believe, infinite growth in a finite world is impossible.
@alexpasch Just because you cant fathom an infinite supply of water doesn't mean its not possible. We can handle that bottle neck when we come to it. 200 years ago a cellphone would look like witchcraft. We have bigger problems, like China seizing 97% of known rare earth metal deposits... Or the Chinese owning huge amounts of our debt... or many middle eastern friends conspiring to change the denomination of oil from dollars. I'm not telling you water supply wont be a problem as some point; I'm just saying its not something worth worrying about yet.
What about the upcoming oxygen shortage??? Can we get an oxygen etf? Is it pertinent? Does it matter? Should I use some of that astrology technical analysis on this one?
Great minds think alike. At least I know im not a nut for thinking the way you do about water.
Officiis qui ducimus voluptatibus iusto quidem est. Ipsum quis similique ut ut. Quasi vel libero eaque. Vel vitae perspiciatis vitae quia.
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