Water is joining gold, oil and other commodities traded on Wall Street, highlighting worries that the life-sustaining natural resource may become scarce across more of the world
Well, sort of. Commodities like gold and oil are expensive enough to make it worth shipping them around the world, which means that arbitrage is possible, which means that changes in supply or...
Well, sort of. Commodities like gold and oil are expensive enough to make it worth shipping them around the world, which means that arbitrage is possible, which means that changes in supply or demand anywhere in the world affect the price. We can talk about the price of oil as if it were one price, even though technically that’s not true, because usually the prices move together. (A benchmark price is used.)
Water isn’t like that. Any trades or conflicts over water rights are going to happen within a watershed (like the Colorado river). The article only talks about trading going on in California and I don’t see that affecting anyone outside the water system they’re connected to, where water is already scarce. Maybe this kind of trading might happen elsewhere but it would be a separate market with its own prices.
Also, scarcity is relative. Farmers need lots of cheap water and often they were there first, so they often have senior water rights. Just about anyone else can pay more. So what happens in some places like Colorado is that that a city buys their land for the water rights. They might lease it back most years (when the city doesn’t need it) or stop farming it altogether. (To simplify. Water rights are complicated.)
It seems like this buying out of farmers as cities grow in population is likely to continue. It makes sense since food can be grown somewhere else and imported, but water is too heavy to make that kind of trading feasible, at least for farming. Ultimately it means somewhat less food grown in the American West.
Trading water futures on Wall Street is yet another way for farmers to hedge against bad weather, but doesn’t seem likely to change the bigger picture.
Well, sort of. Commodities like gold and oil are expensive enough to make it worth shipping them around the world, which means that arbitrage is possible, which means that changes in supply or demand anywhere in the world affect the price. We can talk about the price of oil as if it were one price, even though technically that’s not true, because usually the prices move together. (A benchmark price is used.)
Water isn’t like that. Any trades or conflicts over water rights are going to happen within a watershed (like the Colorado river). The article only talks about trading going on in California and I don’t see that affecting anyone outside the water system they’re connected to, where water is already scarce. Maybe this kind of trading might happen elsewhere but it would be a separate market with its own prices.
Also, scarcity is relative. Farmers need lots of cheap water and often they were there first, so they often have senior water rights. Just about anyone else can pay more. So what happens in some places like Colorado is that that a city buys their land for the water rights. They might lease it back most years (when the city doesn’t need it) or stop farming it altogether. (To simplify. Water rights are complicated.)
It seems like this buying out of farmers as cities grow in population is likely to continue. It makes sense since food can be grown somewhere else and imported, but water is too heavy to make that kind of trading feasible, at least for farming. Ultimately it means somewhat less food grown in the American West.
Trading water futures on Wall Street is yet another way for farmers to hedge against bad weather, but doesn’t seem likely to change the bigger picture.