As climate change, population growth and industrial demand strain freshwater supplies, some analysts are dubbing water “the new oil.” In recent years water has even become a commodity on financial markets, and a water futures market launched on the Chicago Mercantile Exchange in 2020 with contracts valued at about $1.1 billion. What does trading water mean for the environment and for investors?
Water scarcity already affects every continent, and nearly two‑thirds of the world’s population may face shortages by 2025. In California alone, 82% of the population lives in drought conditions. The state depends heavily on groundwater; 85% of Californians rely on it for at least part of their drinking water. During prolonged droughts aquifers sink, leaving little buffer when surface water runs low.
Water futures allow farmers, hedge funds and municipalities to hedge against price volatility by locking in a price six months ahead. While this may help manage risk, critics warn that turning water into a commodity could erode access to a basic human right and may privilege corporate profits over sustainability.
Environmental advocates argue that water markets prioritize profit over equitable distribution, citing past examples where privatization led to dramatically higher prices. On the other hand, proponents say that futures markets could incentivize conservation and improve planning.
In any scenario, the growing interest in water as a tradable asset underscores the urgency of addressing droughts, infrastructure and equitable access. Investors should consider both the financial opportunity and the ethical implications before jumping into water‑related securities.
Nikita Shukla, “Water Is Now Being Traded as a Commodity Amid Fear of Scarcity,” Earth.org.
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