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

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.


  1. ErikTheRed:

    Rick Rule is the head honcho over at Sprott Global Investments, a goldbug / resource-heavy investment firm. I've run into him once or twice and seen him speak a few times. Bright guy in general, if you can apply a filter for what they're selling, and a very nice guy as well.

  2. SamWah:

    As Yoda said, "Break loose, all Hell will."

  3. irandom419:

    "Whiskey Is for Drinking; Water Is for Fighting Over"
    Maybe Mark Twain


  4. Granja:

    Water is the only scarce consumer resource where people do not know its price. Here in California during the worse drought, I would ask people what they are charged for 1 gallon water to be delivered to their home. The answers spanned 3+ orders of magnitude! Virtually no one knew the correct per gallon cost. Do you know what you pay per gallon?

  5. John Moore:

    In Arizona, you cost per gallon *increases* the more you use. That is bizarre.

    Also, the bulk of water is used by agriculture, but all the conservation falls on the cities.

    Yes, the politicians have made a hash of it.

  6. frankania:

    I am an avid builder of houses. In almost all of them, I added rain collecting systems. After all, it falls from the sky and it is free.

  7. Roy Greenwell:

    Water is scarce in some places and plentiful in others.

    What frosts me is that the one-size-fits-all conservation policies originating from places like Southern California or Arizona, while useful there, get foisted on people who live in, say, the Mississippi or Ohio valleys. Every time I purchase a shower head I have to remove or drill out that damn "restrictor" so a proper shower can be had. And don't even get me started on low-flow toilets.

  8. Earl Wertheimer:

    No. It's free, here. We have millions of gallons of fresh water flowing down the St.Lawrence river just a few miles away. We have so much water that every spring, people in lower elevation areas fill up their basements.
    But we still have people complaining about how much water we use...

  9. Mondak:

    Maybe you'll like this then: Take one part water politics (Specifically in AZ) and add two parts dystopian future. Shake and you'll get "The Water Knife" by Paolo Bacigalupi


    I've read all his books and think he is awesome. His short story collection, "Pump Six" is one of my favorites ever.

  10. Estoy Listo:

    Funny thing is, water isn't something we're running out of.