Water, good old H2O.
It's something every one of the world's nearly seven billion people needs every day. But did you know that water for drinking and other residential uses represents just 10% of all consumption? In fact, twice as much goes towards industrial applications, and a whopping 70% is needed for agricultural uses -- it takes hundreds of gallons to grow a single pound of corn or wheat.
And with roughly 98% of the world's water supply too salty to drink, and most of the rest locked up in frozen polar icecaps, this most precious of natural resources is growing increasingly scarce.
It may sound like the apocalyptic plot of a far-fetched science fiction movie, but there are already many regions where crops are wilting, lakes are drying up, homeowners are facing mandatory restrictions, and politicians are arguing over control of dwindling supplies.
Fortunately, this dire situation also presents an incredible investment opportunity, as a handful of ETFs have been built with a single purpose: to assemble the planet's most promising water-related stocks in one place. Emerging-market nations need to deliver ever-increasing amounts of water to their developing industrial centers. Developed nations need to rebuild old and decaying water infrastructure to alleviate the strain on reservoir systems. Much of the world is searching for new technology to make water supplies safer. And as this all unfolds, water-related ETFs are there to capture the profits.
Though Hurricane Ike drenched everything in its path recently, a good deal of the country remains dangerously dry and parched. And depending on where you live, the situation may be going from bad to worse. Part of the problem is simple climate change. Mountain ranges like the Sierra Nevada typically aren't getting the snow pack they used to in the winter. In fact, California rivers are seeing just 55% of their normal runoffs. And lack of rainfall hasn't helped; statewide precipitation over the past six months was the fourth lowest since record keeping began 114 years ago.
Meanwhile, another huge threat for California and its neighbors in the Southwest is an unrelenting drought in the Colorado River Basin that has stretched well into its ninth year. Typically, over 13 million acre-feet of water thunders down the mighty Colorado in a given year -- more than enough to supply California and other thirsty lower basin states with their allotment under the Colorado River Compact. (One acre-foot is equivalent to 325,000 gallons, enough for a family of four for one year).
However, the amount of water flowing downstream has been cut in half in recent years. In fact, flows have dropped below five million acre-feet at times, below that of the 1930s dust bowl era. Remarkably, tree ring analysis shows that the Colorado River hasn't been this dry since 1594 -- making this the region's worst drought in the past 400 years.
Of course, this problem is one that clearly crosses international borders. Over the past century, the world's population has quadrupled. Meanwhile, its water consumption has ballooned roughly +700%. Unfortunately, there isn't one drop more now than there was back in 1900.
Consider these facts from the Earth Policy Institute:
The Tamil Nadu region of Southern India has seen water tables fall so dramatically that 95% of its wells have run dry. In nearby Chennai, a fleet of 13,000 tanker trucks is needed to haul water to thirsty residents.
The Aral Sea, once one of the planet's largest bodies of fresh water, has shrunk to a puddle. The current shoreline is over 150 miles away from old port cities and fishing vessels have been left to rust in the sand.
In China's Hebei region near Beijing, aquifer levels are dropping 10 feet per year and 969 of the region's 1,052 lakes have completely vanished.
In Saudi Arabia, farmers have to dig wells over 4,000 feet deep just to find water. But they aren't the only ones having to go to great lengths to meet their needs. By some estimates, roughly two-thirds of the world's population in 2025 will live in countries where water tables are dropping and supplies are considered scarce. And many of the nations where they live use less than 10% of the U.S. on a per-capita basis -- so water shortages will only be more severe in the near future as these countries industrialize and discover things like dishwashers.
In the meantime, UNICEF reports that a staggering 1.1 billion around the world still lack access to safe drinking water. Clearly, there is a lot of work to be done.
As the world's population grows, we are beginning to see an even greater strain on existing water supplies. If for no other reason, it takes 1,000 tons of water to produce just one ton of grain - and there are millions more mouths to feed every year.
To keep their land arable, farmers have dug millions of irrigation wells and are pumping at rates that are simply unsustainable, which is why groundwater aquifers are being quickly depleted. All of which leads to one inescapable conclusion -- this water deficit is likely to get worse, not better.
On the bright side, this situation will present incredible opportunities for the companies trying to combat it, particularly those involved with water distribution pipes, treatment facilities, purification technologies and other critical infrastructure. In fact, the Environmental Protection Agency is projecting that the U.S. alone will be spending a whopping $275 billion to replace aging facilities -- including 800,000 miles of corroded pipeline that hasn't been upgraded since the 1800s.
If you are interested in researching water ETFs further, here are a couple to get you started:
-PowerShares Global Water (PIO)
-Claymore S&P Global (CGW)
-First Trust ISE Water (FIW)
-PS Water Resources (PHO)