Since we’re talking about futuristic things water is the new oil or should we say the new gold, we say this because water has joined both oil and gold on the wall street, it is now officially being traded, you may ask why and the answer is CLIMATE CHANGE – water shortage.
The price of water has gone up across the world in California, it has doubled in one year, recent droughts and wildfires have made matters worse so an American company called the CME group has added water to the futures market for the uninitiated what is a futures market.
It’s basically an auction market so you buy and sell today for delivery in future the price is set today but the commodity is delivered in future. The idea is for you to bet on how well a product will sell at a future date and set a price for it today, now this kind of trading is done for oil and gold, futures trading they call it now it will be done for water too. This American company has launched contracts related to California spot water the announcement was made in September right after the wildfires the trade began on the 7th of December the price of water futures in California traded for about 486.53 per acre-foot, the index is based on prices in California’s major river basins. This market in California is worth 1.1 billion dollars. We’re talking about water here so it’s safe to say that, in California water is now a commodity a traded commodity, an asset and going forward the price of water will fluctuate just like the price of gold or oil and investors will be able to bet on the future of water prices.
WHAT DOES THIS MEAN FOR THOSE LIVING IN CALIFORNIA?
Well, those who are in favour of trading water say that this move will clear uncertainty around water prices it will help farmers and authorities budget, for water and also allow for better management.
Then there are some who say that water should not be made a tradable commodity because it puts basic human needs under the control of financial institutions one expert compared it to betting on the suffering of others what does it mean for those who are not in California an indication for all of us this is what the future holds, it may just be a matter of time before water hits markets around the world, two billion people live in countries plagued with water problems nearly two-thirds of the world is expected to face water shortage by 2025 and that’s just four years away.
MORE ON THE SUBJECT:
It’s a controversial development – one that reframes water from the United Nations-defined human right to a good for sale to the highest bidder. This approach puts water into a competitive space where the financially privileged can secure their access by entering into sophisticated water future contracts, further distancing less-privileged individuals from claiming access to water as their fundamental right. Such a reimagining of water could profoundly affect India, as well as the financial order of the whole world.
Water futures allow buyers to fix a price for water resources they expect to use at a future date; this safe-guards the buyers (usually manufacturing industries, oil companies, and farming corporations) from the financial risks of rising water prices. In California, which just established a first- of- its- kind “water market” after years of drought that extinguished its groundwater resources last year, the price for water is determined by betting among farmers, investors and municipalities, through transparent pricing regulations, in six different regions. Buyers then purchase a contract at that price, which, in the event of another drought or any other water shortage, allows them to continue purchasing water at the fixed, pre-drought price. This is attractive because it allows them to continue using their normal amount of water, without increasing their operating costs or cutting into profits, even as water becomes scarce. In other words, water futures are a kind of first-dibs, fixed-price water insurance policy.
Conclusively-
Households, businesses, farmers everyone is expected to feel the pinch so it is safe to make water a tradable commodity is it or is there a better approach to water security it has long been said that, the next war will be fought over water; we can only hope that it doesn’t come to that.
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