08/20/09 Gaithersburg, Maryland The price of water is starting to rise in a big way, at least in China. I’ve expected this for a few years.
To set the table, water rates in China have been so far below the global average it’s ridiculous. Especially when you consider the severe water problems in China. The graphic below is from The Wall Street Journal (“China Cities Raise Water Price in Bid to Conserve” by Andrew Batson):
The Chinese are water-poor. They are sucking their aquifers dry. It is particularly bad in the north of China. The groundwater under the North China Plains is draining away quickly. By some estimates, China will exhaust this water supply in the next ten years.
You probably know that the city of Venice is sinking a fraction of an inch per year. But that’s nothing compared to what is going on in Beijing. Parts of Beijing are sinking 8 inches a year! According to Andrew Lees (The Right Game), it is the world’s largest cone of depression (an underground hole created by a depleted water table) at over 15,000 square miles. The second largest cone of depression is around Shanghai.
So finally, many cities are raising the price of water. The WSJ points out several places where water prices could rise 25-48%. Shanghai, for instance, raised water rates 25% in June and plans another 22% increase next year.
The second event that caught my eye was the collaboration between China and India to monitor the health of Himalayan glaciers. This area is very important to both countries. They fought a war over it in 1962. So, the fact that they are getting together on the Himalayan glaciers is meaningful.
Here is why it is so important: Seven of the world’s largest rivers, including the Ganges and the Yangtze, are fed by the glaciers of the Himalayas. They supply water to about 40 per cent of the world’s population.
Well, those glaciers are shrinking. The Indian Space Research Organization, using satellite images, has studied the changes in 466 glaciers. It found they had lost more than 20% of their size between 1962 and 2001.
This melting increases the water flow at first, but eventually slows dramatically as the glaciers either melt completely or reform. These observations have given rise to a kind of “Peak Himalaya” where people wonder if we have not seen the maximum water flow from the mountains.
We know the current run rate on demand is already well above what is sustainable given annual rainfall and river flows. That’s why you have those depressions. That explains the depleted aquifers and the rivers that don’t reach the sea. Now throw into that ugly brew a decline in water supply from the Himalayas. The situation is worse than it seems, if that is possible, because much of the existing fresh water in both countries is so polluted it is unfit for human consumption.
As if all of that weren’t bad enough, the demand for water is still rising rapidly in China and India. The water use per capita in China and India are still well below global averages. As these countries industrialize, they’ll consume exponentially more water. It takes water to make just about everything. For example, to make a 1 tonne passenger car takes more than 100,000 gallons of water. Just to make a cotton shirt takes over 1,000 gallons of water. And most of our water goes into making our food.
So, population growth by itself guarantees increased water demand. (Globally, water consumption increases at more than twice the rate of population growth.) These two countries already have big populations and both will get bigger. When you look at demographic trends, China and India alone will add close 600 million people over the next 30 years. That’s two present-day United States.
Fresh water, like oil, is getting a lot harder to find for 40% of the world’s population. It will get worse before it gets better. The days when we think of water as a cheap resource are coming to a close. That’s especially true for China and India.
Bottom line: We need to create more fresh water. You do that by finding new sources either through new supplies (drilling deeper, desalination, etc.) or by using existing supplies more efficiently (irrigation and other efficiency gains).
All of that takes time and energy. Desalination is energy intensive. Drilling deeper for water or going to more distant source requires energy to pump and move the water. Replacing older, less efficient plants and equipment takes time and energy again. (Detect a theme here?)
Countries, companies and people will find ways to make this transition. The companies that can solve these problems will do well.
Regards,
Chris Mayer
for The Daily Reckoning
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Well yes, I guess. But when countries are facing water crisis (what the plural?) they cut the demand for water. How do they do that? By forcing large users (industrial, and agricultural) to pay much more for it, or simply cut the supply to them. As is happening in some middle eastern countries now, they are outsourcing their agricultural/food production industries to countries that have more fresh water or rainfall. While what you say is true, I suspect the beneficiaries will be top agricultural exporting countries as India and China import more water intensive products.
Jim Rogers has been saying this for quite some time. Coming from India, I have experienced the water shortage first-hand. Alternatives exist. For instance, widespread rain-water harvesting has the potential to raise falling ground-water tables. We had an experience of it in Chennai (where I live). The only problem with this is that people need to act (read spend some money) acting in their own long-term self-interest. They need to realise that spending some money to install RWH systems today will save them thousands over years and the trouble of hunting for water. Education may help, but then it is a long-term project. It does not pay either, unless someone owns the underground aquifers and hence has an incentive to maintain them.
To date, probably the most reliable and widely-accepted water estimate to produce a pound of beef is the figure of 2,500 gallons/pound.
Newsweek once put it another way: “the water that goes into a 1,000 pound steer would float a destroyer.”