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Will Water Reach Unattainable Prices?

Water has joined both oil and gold on Wall Street. Now it is officially marketed. You may ask why, and the answer is climate change.

The Woman Post | Carolina Rodríguez Monclou

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The price of water has risen all over the world. In California, it has doubled in one year. Recent droughts and wildfires have made things worse. The American company The Chicago Mercantile Exchange (CME) group has added water to the market of the future.

"It's an auction market, so you buy and sell today to deliver it in the future. The price is set today, but the product is delivered in the future," reports WION.

This type of trade, better known as "future trade", is done for oil and gold. The CME has launched contracts related to California Spot Water. The announcement was made in September, just after the wildfires and trading started on December 7, 2020.

The future price of water in California is trading at about $ 486.53 per acre-foot. The index is based on prices for California's major river basins. This market in this state is worth 1.1 billion dollars. "It's safe to say that in California, water is now a commodity," the source cautions.

The price of water will fluctuate, as will the price of gold or oil. In addition, investors will be able to bet on the future of water prices.

Essential commodities for financial markets have several common characteristics: they are used globally, they are produced in only a few places, and they are relatively rare. In addition, its value is high in relation to its mass, so that even over long distances, the cost of freight is a small proportion of the final price.

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For those who are in favor of the water trade, this move will clear up the uncertainty around water prices. It will help farmers and authorities to budget for water and will also enable better management.

Some say that water should not become a marketable commodity because it puts basic human needs under the control of financial institutions. According to WION, this situation can be compared to betting on the suffering of others.

What does it mean for those who are not in California? It is an indication to all of us as to what the future holds. It may be a matter of time before the water reaches markets around the world.

Two billion people live in countries plagued by water problems. The source also ensures that almost two-thirds of the world is expected to face water shortages by 2025, and that's only four years.

However, it doesn't make much sense to spend dollars on transporting water that changes hands in its end markets for just pennies. That is particularly the case because, for all that we talk about water scarcity, it is enormously abundant compared to any other product. In most places, it can be collected for free by simply connecting a tank to the drain pipe.

Households, businesses, farmers, and everyone are expected to feel the rush. The questions that remain are: Is it safe to make water a marketable product? Or is there a better approach to water safety?