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"Water Is The Most Mispriced Commodity In The World". I agree

Posted by on | February 26, 2018 | Comments Off

A few years ago there was a contest here in Arizona to see who could submit the best water conservation marketing campaign.   I submitted a picture of my water bill with the price photo-shopped so it was doubled.  Politicians here in Arizona subsidize the hell out of water, block or refuse to fund infrastructure projects that would produce more, and then blame consumers for shortages.

Anyway, Zero Hedge quotes a guy named Rick Rule, who I don’t know, on a variety of commodities but his bit on water really struck me:

Following their discussion of nuclear energy and the future of uranium pricing, Townsend posed a much broader question: What will be the most important themes in the natural resources market in the coming years and decades.

Rule’s answer might reinforce readers’ anxieties over the availability of water – something that’s already been widely discussed because of Cape Town’s looming “Day Zero.” Rule even went so far as to call water “the most mispriced commodity on Earth”.

The third place – and this is very much more difficult to implement – is water. Water is the most mispriced commodity in the world. Because water is allocated politically. It is believed to be a right, as opposed to a commodity. The consequence of that – as an example, here in the US Southwest, we have taken sources of water, like the Colorado River, and we have allocated approximately 130% of the flow of the river to various claimants. This is sort of hard on the river. You have a circumstance where water flows uphill to votes rather than downhill for money. And you can’t allocate something that doesn’t exist.

And also because of the structure of the American water business. Because of the fact that most of it is delivered politically rather than via markets. The rents that go to water, while they are insufficient to maintain supply, go to municipalities. And they go to fund current political goals as opposed to maintaining the infrastructure for the production and distribution of water.

It is believed, on a country-wide basis, that we have deferred as much as 3 trillion dollars in sustaining capital investments in the water business. I can’t tell you when this theme comes home to roost. But when it does come home to roost, this might be one of the great resource themes of all time.

 "Water Is The Most Mispriced Commodity In The World".  I agree  "Water Is The Most Mispriced Commodity In The World".  I agree  "Water Is The Most Mispriced Commodity In The World".  I agree

 "Water Is The Most Mispriced Commodity In The World".  I agree

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