The Undervalued Commodity That's More Valuable Than Gold

Date 19/08/2008

The Right Side

Garry White

So Britain’s summer has been yet another washout. Rain and floods are dominating the headlines yet again.

Despite the effect that this has on the national psyche, I think this is a good thing. Let me explain why...

Water is the most undervalued commodity in the world. We turn on the tap and it flows. We take it for granted.

But we shouldn’t. A human being can survive for less than 6 minutes without air... less than 6 days without water and around 6 weeks without food. So, after oxygen, water is the most important commodity in the world.

It is unlikely that we will ever be short of water in Britain. But this is not the situation many countries will face. As far as water is concerned, they are very resource poor. I’m thinking of places like Australia, Spain and the Middle East.

This has far greater consequences than quenching human thirst. I’m talking energy... and in particular energy poverty.

The lack of water is likely to compound the energy crisis in many of these countries.

Generating electricity is the most water intensive activity that humans undertake. According to the US Geological Survey, 48% of all the water used in the US each day is used for power generation.

This situation is not going to change. In fact it is going to get worse.

The world is going nuclear.

I am a big supporter of nuclear power as a sensible route to energy security. However, countries facing water shortages could see their water problems compounded by the switch to nuclear power.

Depending on the plant, a nuclear power station will use between 20% and 83% more water than fossil fuel plants. This isn’t a problem for damp and wet Britain, but it posed a real dilemma for countries such as Australia.

The country has already been forced into expensive long-distance water haulage to some power plants as local supplies dwindle. It has also been forced to cut electrical generating capacity and output at some plants. This has led to higher and more volatile electricity prices and intensified competition for water between power plants, agriculture, industries, and environmental flows. This problem is only going to get worse. In the next ten years, Peak Water may well become more important than Peak Oil.

You cannot generate electricity without water — but you cannot move water around without electricity. The two are inextricably intertwined... but policy makers never seem to consider this fact.

Let’s take California as an example.

The single largest use of power in the state is for the pumps that keep the water flowing through Los Angeles. They have to be kept running. The great and good all live on top of the hills surrounding the city, leaving the poorer people to breathe in the smog.

It is unthinkable that the authorities will cut the water supply to the rich. Even for a moment. They expect their water to be pumped from the valleys to the hilltops so they can fill their Jacuzzis... and they get what they want.

This means that running a hot tap in LA for five minutes uses as much energy as running a 60-Watt light bulb for a whole 14 hours. So in LA in particular, focusing on water usage is actually the best way to cut energy use... and help with electricity generation.

In the future, resource poor countries are going to have a difficult time. Britain is essentially a resource poor country in many ways. But we have one significant advantage. Once Peak Everything hits, we are likely to have lots of the most important commodity of them all.

We are very lucky indeed. It’s just a shame about the weather.

Smart Commodities looks at investment opportunities in the global resource, energy and infrastructure sectors. Click here to discover more about the importance of water.

Regards,

Garry White
Editor
Smart Commodities UK

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