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The Water Crisis Is Your Investment Opportunity

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Diverse sectors and subsectors give you many chances to profit.

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In other words, dry will become drier, and wet will become wetter. Some of this precipitation will come with increased levels of intensity, leading to heavier run-off and potential flooding. In areas where snow pack is essential to water supply, less snow and quicker melting periods will disrupt reliance on historical water-flow patterns. In addition, surface water and quality and quantity will be adversely affected due to evaporation and higher temperature.



These issues bode poorly for regions such as the Southwest United States -- which is reliant on the flow of the Colorado River to feed water to seven states and parts of Mexico – and is a situation repeated many times over throughout the world.

Demand


On the other side of the supply-demand equation is the fact that the world is encountering a series of events that are driving water demand at increasing rates. Population growth is the easiest to understand. Global population will increase nearly 50% over the next 40 years from 6.7 billion people to over nine billion people in 2050. More people translates to more water consumption. However, the true problems lie in socio-economic issues, the rise of the emerging markets, and the way water, energy, and agriculture interact.

As the emerging markets industrialize, they'll require more water for industrial processes. Water is used in almost all processes from paper and pulp manufacturing to steel production to semi-conductors and biotechnology. The industrialization process will lead to migration from the rural inland areas to the coastal regions. Cities will grow, leading to urban sprawl -- which adversely effects natural watersheds and water availability and quality.

Industrialization will help populations move up the socio-economic ladder and allow for higher standards of living. Higher living standards translate into higher energy consumption for electronics, heating, air conditioning, and so forth. Water is critical for energy, not only for the mining of hydrocarbons, but also for energy production.

Conversely, moving and filtering water is extremely energy-intensive. To put the energy demands of water into perspective, consider the following statistic from a report by California Department of Energy: California uses 30% of its natural gas, 19% of its electricity, and 88 billion gallons of diesel fuel to move and clean water on an annual basis.

Further, dietary habits will change from starches (rice) to meats (chicken and beef). Meat requires significantly more water to produce a calorie than starch. Agriculture already equates for nearly 70% of global water demand and will only increase as diets change. Fertilizer, which will be critical to producing agricultural yields, is reliant on energy as an input. Oddly, food is being trumpeted as an energy resource through bio fuels, despite the obvious linkage of agriculture to the increasing water shortage.

This interaction is the water-energy-agriculture nexus; each issue feeds off the other, creating a feedback loop that demands more of the other. The nexus coupled with population growth drives water demand at nearly exponential rates while supply becomes increasingly scarce.

The Opportunity: Water as a Centerpiece to Sustainability


At the center of our long-dated thesis is the notion that water is a centerpiece to sustainability. Water is required for living standards, environmental standards, manufacturing, energy mining, energy production, and food production. Without an efficient and effective set of management tools and techniques, water scarcity will grow and hinder energy and food production. Together, these three items -- water, energy, and agriculture -- are possibly the largest issues facing society in the coming decades.
No positions in stocks mentioned.
The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.

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