Two words that fill many economists with dread are ‘peak oil’. The phrase is meant to signify that moment when oil production peaks, and falls into decline. What will happen when that day occurs? Will we see the end of economic growth, or will we barely notice it, so rich will we be in renewable energy? But here are two words to send even more fear down our collective spines: ‘peak water’.

Last week the great and the good in the world of water – water scientists, if you will – descended on Bonn for the latest conference from the Global Water System Project.

This is what it concluded: “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 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 

It is not yet a disaster. And the conference attendees did have ideas on how a catastrophic shortage of fresh water can be avoided.
But be under no doubt, as this century moves on, water will become the commodity that is the most important in shaping the economic and political map of the world.

In many parts of the world, countries are relying on supplies of water from underground sources that may have been built up over thousands of years, and these supplies are running dry.

China is aware of this danger, which is surely its real motivation behind its policies in Tibet. Rivers that flow from Tibet provide fresh water not only to China but the world’s second most populous country too. As China and India become the richest and second richest country in the world, Tibet may prove to be the world’s most dangerous pressure point.

As for investors with a long-term strategy, think water. Think innovation in water, think water resources and start getting used to seeing natural water reserves valued in much the same way that we value oil reserves.
Water may also be the ultimate hedge investment.

Of course, if we finally solve the riddle of water desalination, and work out how to efficiently tap the water reserves in our oceans, and then how to pump it to the elevated places of the Earth where water is in short supply, this may prove to be a scare over nothing. However, investors will be able to console themselves. Sure, their investment into water may be worth as much as they expected, but at least global starvation and conflict will have been averted.

© Investment & Business News 2013