Water, water everywhere

August 12, 2008

British water companies announced a plan earlier this week to
increase household water bills by up to 4.5 percent above
inflation between 2010 and 2015.

A pain for households, yes. But such increases underline a trend
that may prove tempting to investors searching for new commodity
assets as oil, gold etc tumble from their peaks.

The water index on the International Securities Exchange, which
includes companies engaged in water distribution, water
filtration, flow technology and other water solutions, has risen
more than 5 percent since January.

World water consumption could also double over the next 20 years
— according to a report from rating agency Moody’s economic
research arm — and at current growth rates, water demand by
2025 would exceed the available supply by 56 percent.

Water demand could rise because of climate change which trigger
more frequent droughts, increased migration to cities and
industrialisation of emerging economies.

Desalination could offer one supply-side solution, although it’s
costly. “(It) requires large amounts of energy as well as
specialised and expensive infrastructure. Yet as fresh water
grows scarce, this could become more common,” says Christin Li,
economist at Moody’s economy.com.

But is it a liquid asset?

No comments so far

We welcome comments that advance the story through relevant opinion, anecdotes, links and data. If you see a comment that you believe is irrelevant or inappropriate, you can flag it to our editors by using the report abuse links. Views expressed in the comments do not represent those of Reuters. For more information on our comment policy, see http://blogs.reuters.com/fulldisclosure/2010/09/27/toward-a-more-thoughtful-conversation-on-stories/