PEAK WATER

“It should be obvious from simple arithmetic that population growth is on a direct collision course with increasingly scarce resources.” – Jeremy Grantham

The notion of peak water probably sounds crazy to most people. The earth is 70% covered by water. The water cycle replenishes water on a continuous basis. The global warming enthusiasts tell us that glaciers are melting and oceans are rising. This should make water more plentiful. But, as they say in the real estate business – Location, Location, Location. Freshwater shortages in the wrong places could have calamitous consequences to those regions, worldwide commodity prices, the economic future of nations with water shortages and possible war. Regional water scarcity means water usage exceeds the annual natural replenishment from the water cycle. The impact of water scarcity can be far reaching. It can lead to food shortages, famine, and starvation. Many nations, regions and states have mismanaged their water resources, and they will have to suffer the long-term consequences.

Source: Wikipedia

The peak oil debate gets a tremendous amount of press and generates heated disagreements on both sides. The focus on peak oil has permitted the future water crisis to stay under the radar. As usual, myopic self serving politicians have ignored resource issues for the last 30 years. These were 30 years of debt financed good times with relatively low prices for all natural resources and commodities. The end of this period of low prices is nigh. The brilliant investment manager Jeremy Grantham lays out the future in his recent newsletter:

“We must prepare ourselves for waves of higher resource prices and periods of shortages unlike anything we have faced outside of wartime conditions. In fact, I believe we are already several years into this painful transition but are still mostly invested in denying it.”

The following chart provides a useful comparison of oil and water as resources. While oil is non-renewable and limited, it is replaceable by other more costly alternatives. Water is renewable and relatively unlimited, but there is no substitute and it is only useful in the precise places. The Southwest region of the United States, our fastest growing region, has considerable freshwater constraints and could ultimately run out of water.

CHARACTERISTIC	OIL	WATER
Quantity of resource	Finite	Literally finite; but practically unlimited at a cost
Renewable or Non-Renewable	Non-renewable resource	Renewable overall, but with locally non-renewable stocks
Flow	Only as withdrawals from fixed stocks	Water cycle renews natural flows
Transportability	Long-distance transport is economically viable	Long distance transport is not economically viable
Consumptive versus non-consumptive use	Almost all use of petroleum is consumptive, converting high-quality fuel into lower quality heat	Some uses of water are consumptive, but many are not. Overall, water is not "consumed" from the hydro-logic cycle
Substitutability	The energy provided by the combustion of oil can be provided by a wide range of alternatives	Water has no substitute for a wide range of functions and purposes
Prospects	Limited availability; substitution inevitable by a backstop renewable source	Locally limited, but globally unlimited after backstop source (e.g. desalination of oceans) is economically and environmentally developed
Source: Pacific Institute

Facts & Figures

According to the United Nations, by 2020 water use is expected to increase by 40% to support the food requirements of a worldwide population that will grow from 6.7 billion people to 7.5 billion people. The U.N. estimate is that 1.8 billion people will be living in regions with extreme water scarcity. Even though 70% of the globe is covered by water, most of it is not useable because it is saltwater. Only 2% of the earth’s water is considered freshwater. Most of the freshwater is locked up in glaciers, permanent snow cover and in deep groundwater. Desalinization is a process that can convert saltwater into freshwater, but it is only practically useful on the coastlines and it is 15 times more expensive. The middle of the United States is considered our breadbasket, where the majority of our food is grown. Drought and/or over-consumption of existing sources of water in this sensitive area would have worldwide implications, as the U.S. is a huge exporter of wheat, soybeans, rice and corn. The United States exported $115 billion of agricultural products in 2008 while importing $80 billion, according to the USDA. This is one of the few remaining businesses where the U.S. is a net exporter. Population growth and water shortages could change that equation.

One estimate of global water distribution:
Water source	Water volume, in cubic miles	Water volume, in cubic kilometers	Percent of fresh water	Percent of total water
Oceans, Seas, & Bays	321,000,000	1,338,000,000	—	96.5
Ice caps, Glaciers, & Permanent Snow	5,773,000	24,064,000	68.7	1.74
Groundwater	5,614,000	23,400,000	—	1.7
Fresh	2,526,000	10,530,000	30.1	0.76
Saline	3,088,000	12,870,000	—	0.94
Soil Moisture	3,959	16,500	0.05	0.001
Ground Ice & Permafrost	71,970	300,000	0.86	0.022
Lakes	42,320	176,400	—	0.013
Fresh	21,830	91,000	0.26	0.007
Saline	20,490	85,400	—	0.006
Atmosphere	3,095	12,900	0.04	0.001
Swamp Water	2,752	11,470	0.03	0.0008
Rivers	509	2,120	0.006	0.0002
Biological Water	269	1,120	0.003	0.0001
Total	332,600,000	1,386,000,000	–	100
Source: Igor Shiklomanov’s chapter "World fresh water resources" in Peter H. Gleick (editor), 1993, Water in Crisis: A Guide to the World’s Fresh Water Resources (Oxford University Press, New York).

The major challenges regarding freshwater are:

Tremendously uneven distribution of water on earth.
The economic and physical constraints of tapping water trapped in glaciers.
Human contamination of existing water supplies.
The high cost of moving water from one place to another.

Regional scarcity is not easily solved. Once the extraction of water exceeds the natural rate of replenishment, there are only a few options.

Reduce demand to sustainable levels.
Move the demand to an area where water is available.
Shift to increasingly expensive sources, such as desalinization.

None of these options is available for many areas in the Southwest U.S. The cities of Las Vegas, and Phoenix were built in the middle of the desert. The Hoover Dam, built on the Colorado River near Las Vegas during the Great Depression, created Lake Mead, the country’s largest artificial body of water. The lake provides water to Arizona, California, Nevada and northern Mexico – but after several recent years of drought, on top of ever-growing demand, it’s dangerously depleted. Housing developments on the outskirts of these towns have been stopped dead in their tracks by lack of water supply. The growth of these major U.S. metropolitan areas is in danger of going into reverse if their long-term water supplies are not secure.

Mike Shedlock noted the difficulties facing the Southwest in a white paper that he wrote on the subject of peak water:

“There is more water allocated to each user from the Colorado River than there is water to allocate. As long as some people are willing to sell their water, this isn’t an immediate problem. Chevron’s water rights for its DeBeque, Colo., shale oil project are leased, not sold, to the city of Las Vegas for drinking water. How will Las Vegas replace that in the future when Chevron won’t extend the lease? Many areas are using ground water that will be used up entirely in just a few decades.”

Potential Impact on Commodities

The United States, for better or worse, is a sprawling suburban dominated country with large supplies of freshwater in some regions and limited amounts in other regions. Suburban sprawl has put intense pressure on local water supplies. The millions of acres of perfectly manicured green lawns and millions of backyard “cement ponds” require vast quantities of water to retain that glorious green hue. The Ipswich River near Boston now "runs dry about every other year or so," according to Sandra Postel, director of the Global Water Policy Project. "Why? Heavy pumping of groundwater for irrigation of big green lawns." In drought years like 1999 or 2003, Maryland, Virginia and the District have begun to fight over the Potomac — on hot summer days combining to suck up 85 percent of the river’s flow. With 67 million more people expected to inhabit the United States by 2030, these water shortages will only become more severe.

Source: The Big Picture

Kansas is considered part of the fertile mid-section of our country that has allowed the average American to become morbidly obese. The story of Scott City, Kansas should be a warning to all farming communities in the Midwest. Mike Shedlock describes what happened to Scott City:

“Farmers around Scott City pumped with abandon from the underground reservoir called the Ogallala Aquifer in the 1960s, ’70s, and ’80s, raising record wheat, corn, and alfalfa crops, and never once worrying that they might hit ‘E’ on the tank fueling the economy. But today, in a withering downtown that no longer has a place for residents to buy shoes or dress clothing, some have likened the situation to a car running out of gas.

“‘If you run out of water for your crops, that’s one thing,’ farmer Kelly Crist says, recalling the day about a decade ago when his well went dry. ‘But when you go to your house and turn the shower on and there is no water, it’s a serious situation. Today, the 46-year-old farmer relies on an 800-foot-deep well that pokes into a deeper but smaller aquifer to fill his toilets, sinks, and bathtub.

“Water levels in the Ogallala, which stretches from Texas to South Dakota, vary in depth, and some communities have decades — or even more than a century — before the water runs out.Scott City sits atop a shallow portion of the aquifer. Water experts say that makes it a window into the Plains’ future.

“‘The area around Scott City is beginning to experience what the rest of the region is going to experience if we continue to pump the way we do,’ says Rex Buchanan of the Kansas Geological Survey. ‘If they keep going at the rate they are, it’s not a sustainable lifestyle. Something has to give.’

http://upload.wikimedia.org/wikipedia/commons/8/8e/Stocks_to_use_ag_Indicators_market_1977_2007.png

Food production around the world has begun to flatten or decline. The last 10 years have seen steady erosion in the amount of grain grown per capita. And since wheat and rice and corn are all world markets, with developing countries growing at a breakneck pace, the need for imports elsewhere could drive up the cost of food everywhere. The Chinese are relentlessly converting farmland to industrial uses (even as they continue to demand more meat and grains in their diet). The price spike in 2007 and 2008 was not a onetime event. It was a foreshadowing of a much more costly future for consumers. The U.N. said global food reserves in 2008 were at their lowest level in 30 years, which was good for only 53 days, compared with 169 days in 2007. Peak oil and peak water are misleading terms. They should be changed to peak cheap oil and peak cheap water. We’ll be able to produce oil and water for decades, but it will cost significantly more to do so. This will result in much higher commodity prices as farming requires prodigious amounts of oil and water to produce the food for the 6.7 billion people that inhabit the planet (8.3 billion projected in 2030).

More Dire Consequences

“In real life our species has such a modest ability to deal with distant outcomes or to defer gratification that a bad ending is probably inevitable. We need, it seems, the shock of a Pearl Harbor to really gear up and make sacrifices.” – Jeremy Grantham

Americans seem to have a problem facing up to imminent threats until they hit them like a sledgehammer. This penchant for delay is going to cause much heartache and pain for most Americans. Hoping for a good outcome will not work. Thirty years of delay has set the stage for eventual conflict over resources. Peak oil is the more likely trigger for armed conflict. We know who has the oil – Middle East, Russia, Brazil, Canada. We know who needs the oil – United States, China, Europe, Japan. Peak water as a trigger for conflict isn’t on anyone’s radar screen. It is interesting that Brazil, Russia, and Canada also have the greatest amount of renewable freshwater on the planet. South America, which has 28% of the world’s freshwater and consumes only 6%, is the prize. Asia, which has 29% of the world’s freshwater, consumes 50% of all the freshwater on the planet. With high population growth and industrial development something will have to give in Asia.

Total Renewable Freshwater Supply, by Country

Country	Annual Renewable Water Resourcesa (km^3/yr)
Brazil	8,233
Russia	4,498
Canada	3,300
United States of America	3,069
Indonesia	2,838
China	2,830
Colombia	2,132
Peru	1,913
India	1,908
Congo, Democratic Republic (formerly Zaire)	1,283
Venezuela	1,233
Bangladesh	1,211
Myanmar	1,046
Source: Pacific Institute

A looming future crisis of food shortages and skyrocketing commodity prices is inevitable. Peak water will play a significant role in the crisis. The facts are undeniable:

Droughts in key farming belt areas due to climate change.
Less snow pack in the mountains resulting in less freshwater flows during growing season.
Contamination of freshwater sources by industrial waste.
Soil erosion and depletion of underground aquifers.
Higher oil prices resulting in higher fertilizer costs, food transport, and industrial agriculture.
Expansion of bio-fuels as an energy source.
Worldwide population growth, with developing countries expanding the diets of their middle class.
Subsidies and tariffs that protect farmers and distort market prices.
Inability to transport water economically.

War over resources has happened before and it will happen again. Japan attacked Pearl Harbor because the U.S. was cutting off its oil supply. The devastating combination of peak oil and peak water in the next five years will combine to create a commodity crisis that is likely to spur armed conflict as countries contend for declining resources. The question is who will attack who and when. In the meantime, plant a vegetable garden.

To discuss this important issue and others, join me at www.TheBurningPlatform.com.

*****

Here’s an informative comment by Readyornot, many surprising statistics to consider:

Over 70% of the earth’s surface is covered with water, mostly salt water. Only 3% of the world’s water is fresh water of that less than .1% is useable in a renewable fashion. On a smaller scale that is equal to ½ of a teaspoon per gallon.

The minimum amount of water needed to sustain life is 1.3 gallons per day per person; 13 gallons per day per person for drinking, cooking, bathing, and sanitation. These numbers do not include water needed for farming, raising live stock or required for any significant industrial activity.

Currently the lack of clean drinking water is a reality for 1.2 billion people; poor sanitation affects 2.4 billion people. This results in 250 million cases of disease every year, which in turn is directly responsible for 5 to 10 million deaths annually in 90 countries. These are the same countries that have the highest unemployment and utilize millions of man-hours to gather and haul water.

World-wide over 200,000,000 hours are spent daily “manually gathering and hauling” water in underdeveloped countries. In these same countries 90% of wastewater is discharged directly into rivers and streams making potable water more difficult to find and exacerbating the problems with water borne diseases

In central Africa large lakes are rapidly shrinking. Lake Chad is 2% of its size just 10 yeas ago. Lake Victoria is evaporating, losing almost 1 ft. in depth each year. Lake Victoria is the primary water supply for the Nile River. Egypt announced it would declare war on any nation that disrupted the flow of the Nile River. This type of announcement or immediate military action will be common place as more countries see domestic livestock dying, crops failing and family deaths resulting from lakes and aquifers drying up, and death caused by unsanitary conditions and contaminated water. This water crisis is the result of population growth, global warming, climate change, and poor conservation. Warmer temperatures, rapid glacier melting, and weather pattern changes are fact, no matter what the cause we face a growing crisis and need to act accordingly.

Without adequate water it is impossible to build an industrial or agricultural base. Even countries with natural resources that generate foreign investment and income will not have sustainable economic growth unless they utilize that income from exporting natural resources to develop sustainable water reserves, delivery systems and sanitation. They must learn to manage the natural resources they are exporting so those resources are not completely depleted once they have built the water infrastructure required for their population and development of industry and agriculture.

The US has about 9% of the world’s irrigated land. In 1980 the US exported 17% of the world’s food supply; in 2007 it exported less than 11% of the world’s food supply but continues to use a larger % of the world’s water and oil resources.

By supplying food to third world countries the US was actually insuring continued poverty for the populations of those third world countries. With no need to grow food there was no need for roads to transport food, no immediate need was seen to develop water resources, no need for factories to build farm equipment, no need to work- – basically without farming as a base there is very little economic development.

Corporate farms are 5 to 25% less productive, less energy efficient, generate more chemical waste and use significantly more water than family farms. Over 500 family farms go out of business each week in the US.

The world’s renewable water supply has fallen by 50% per person in the last 25 years because of population growth, pollution and climate change.

By 2025 50% of the worlds projected population will not have adequate clean water for drinking, cooking, sanitation or washing. That could result in as many as 20,000,000 deaths per year (55,000 per day) and a dramatic world-wide increase in disease. How fast can disease spread?

There were an estimated 700 cases of aids worldwide in 1980, in just 28 years that number grew to over 42,500,000.

Water resources must be managed two ways; conservation which includes recycling, pollution control, waste, etc. and supply which includes dams, storage, delivery, etc.

As much as 50% of purified city water, delivered via old or poorly built city utilities in Central and South American Cities and in Africa, is lost because of leaky pipes or substandard materials. America’s water infrastructure is in trouble, hundreds of millions of gallons are “lost” in US cities because of antiquated supply and sewage lines. (After the Commercial Real Estate Bailout, and the GRID Bail-out is the Water Bail-out next?) Billions more gallons are lost because of acid rain, excessive use of chemicals, pollution caused by both man made and natural disasters. We will find a substitute for oil, there is no substitute for potable water.

There are 261 rivers shared by two or more countries (there are 194 nations world-wide, about 250 entities if territories are included). These 261 watersheds account for 60% of the world’s fresh water supply and 40% of the world’s population lives in these watershed areas.

How will water rights shared? What about pollution and “poisoning” upstream or damming a watershed resulting in severe or life threatening water shortages downstream? What happens to the world population if governments, banks, corporations, and the ultra rich end up controlling the world’s water supply much the way they have controlled and are now destroying the world’s money supply and the general population’s economic independence?

The crisis extends beyond fresh water resources with 40% of the world’s ocean coastline eco-systems either dead or dying. These eco-systems include marshes, wetlands, coral reefs, plankton beds, tide pools, brackish water areas, etc. These eco-systems are nature’s fish hatcheries as well as nutrient and oxygen replenishment zones for all the world’s oceans. What happens if the world’s largest and richest eco-system can no longer support itself?

These coastal marshland areas are also nature’s built-in defense against tidal waves, hurricanes and rising ocean levels.

Oil is a valuable commodity, so are precious metals but only water is essential to life. Oil will again exceed $100 per bbl; some estimates say $500 per bbl in the next two decades. Gold may exceed $3,500 oz. before middle of the next decade. How much is a gallon of water worth? How much is a gallon of water worth if you haven’t had any for 3 days? What is the world’s most valuable resource? What is the world’s most critical resource?

There is a world water crisis. The crisis can be managed. It will take trillions of dollars, millions of gallons of oil and other resources as well as hundreds of millions of man hours for project planning and construction. In essence, it will take the resources currently being used to decide “who controls the oil.” How important will the “control of oil” be if 50% of the world’s population becomes disease ridden creating a pandemic because there is not enough clean water to survive? With 50% of the world population diseased; how healthy will the remaining 50% of the population be?

The US and Canada use more water per person than anywhere in the world, not by just a little more, but – 2 to 8 X more than most developed nations and 20 to 60 X more than many of the countries in Africa, the Mid-East and some smaller South American countries.

Russia has 1 lake that contains 12% of world’s useable fresh water. Lake Superior is the largest fresh water lake in the world. The Great Lakes are the world’s largest fresh water resource containing over 20% of the world’s fresh water.

Water conservation, effective recycling technology, elimination of industrial and agricultural pollution and waste, as well as effective, inexpensive purification and desalinization techniques will become critical to survival. The technologies to find, extract, purify, recycle, store and conserve water will become the world’s most valuable technologies.

This is a developing paradigm shift. Two years ago I believed we had 20 years before the crisis grew out of the third world and became acute on a world-wide basis. Now it appears to me the indicators of dramatic and sudden loss of significant water resources, per person, are increasing in severity and frequency. Sinking water tables, massive fish dye offs, coral reef destruction, water surface temperatures spiking, the extinction of 1 species every 20 minutes, and the expansion of invasive non native aquatic life on an unprecedented scale, just to name a few.

None of this is good news for the world population but out of crisis comes opportunity. The US can ride the crest of this coming wave. There are strategically significant implications, huge economic potential, and if ever there was an industry that could be “righteous” in the eyes of the world, this could be it. There is however one problem, we need to clean up our own back yard right now or in a few years we will be “up shit creek without a paddle” like the majority of the rest of the world. It is history repeating itself but instead of “peak oil” it will be “peak water.” We can not afford to procrastinate for 30 years as we have with oil, the grid, and infrastructure maintenance.

WATER, there is no substitute, our lives depend on it.

readyornot

The link below has a great deal of information on the world water crisis.

http://www.unesco.org/water/wwap/