[0]: https://www.businessinsider.com/harvard-california-vineyards...
edit: correct dates.
I wouldn't gave guessed they would be that close, but it bodes very well for inexpensive energy / improvements in desalination technology being a source of water.
[1] https://www.eco-business.com/news/hyflux-to-produce-worlds-c...
Interestingly, there is a theoretical floor to the amount of energy invested per unit of water desalinated, and we're apparently quite close to it. From here, our best hopes for improvement are to use waste heat or solar thermal energy to desalinate water.
In the meantime as long as it continues, the situation be taken advantage of by those who know how to find holes in the system for concentrated private gain.
The market mostly seems to work fine. Henry Hub is somewhat arbitrarily picked as the most canonical price point. And then a lot of price discovery occurs in robust "basis" markets (i.e. region-specific contracts).
And we're about twenty years into a drought.
120 gallons of water for an egg 4000 gallons of water for a bushel of corn 11000 gallons of water for a bushel of wheat
That is..2 lbs or baked bread is 1000 gallons of water.
You are wearing 650 gallons of water if you were wearing a cotton shirt.
And wait for this: 135000 gallons of water for a ton of alfafa(which btw we exported cheap to China during California drought because it was cheaper to send that in empty shipping containers going back than truck it to a California dairy farms)
In some parts of the world water is literally free, you only have to pay for the connection. Whereas in others there's a shortage and people have to resort to clever engineering, like Israel with desalination or Libya with the Great Man-Made River project. In both of those cases the problem would be trivial if global transportation costs were zero.
Even with oil it is a thing - there's a different spot price and different forward curve at each tradeable terminal. For example the recently famous negative prices (and the monster contango) were observed only in Cushing, OK; other ports were always > 0. With water the difference would be much larger.
Also, fun to see the expected seething at anything related to finance here :)
I also wonder how a futures contract with instant liquidity interplays with standard water bills, which as far as I know are billed at rates that get adjusted yearly at most (at least here in LA).
A farmer can sell their crop before it has grown to improve cash flow, chocolate companies can buy cocoa that they will need next year so they have a predictable price and these guys sit in the middle.
I’m saying Wall Street banks are the kinds of investors to sell delivery contracts and then find a way to gather water cheaply and actually deliver it (for a nice profit). Banks aren’t always just middlemen.
Water rights are bonkers-crazy.
In general, by the time something gets to being turned into financial instruments like this, the actual step from whatever state it was in prior to a regulated, standardized, liquid, public contract is generally good. Light is an excellent disinfectant.
Markets quite often do not help usher in eras of rationale and logic. A lot of that goes out the window when "there's money to be made".
"It was an Achaemenid ruling that in case someone succeeded in constructing a qanat and bringing groundwater to the surface in order to cultivate land, or in renovating an abandoned qanat, the tax he was supposed to pay the government would be waived not only for him but also for his successors for up to 5 generations"
"4. What is the Nasdaq Veles California Water Index?
Nasdaq and Veles Water have partnered with WestWater Research, LLC, the leading economic and financial consulting firm in water trading, to develop the Nasdaq Veles California Water Index.
This index was launched by Nasdaq in October 2018 and tracks the price of water rights transactions (leases and sales) across the five largest and most actively traded regions in the state of California, including surface water and four adjudicated groundwater basins. NQH2O utilizes WestWater’s WaterlitixTM database as the source for the underlying data."
https://www.cmegroup.com/education/articles-and-reports/nasd...
It's based on an acre of California water one foot deep and cash-settled so that, you see, nobody must deliver or receive actual H2O.
Crude oil (like almost all other commodity futures) is also traded based on local physical benchmarks, WTI at the Cushing, Oklahoma storage facility for the price you see quoted for U.S. oil.
I wonder if it will help the farmers in the region hedge their production and also would it improve price discovery. The open interest will tell us.
PS. Cushing (the terminal for west texas intermediate) is in Oklahoma.
https://www.theguardian.com/us-news/2019/mar/25/california-w...
Western Washington has a massive excess of water but can't use this technique to "send it" anywhere... the clay-heavy soil isn't much good for industrial-scale crop production (aside from trees of course).
It's a big hoax, like all cash-settled futures.
Wall Street doesn't mind that.
Oops of course you're right, thanks. Changing in the comment. Like you I also wonder if these contracts will take off.
Speculation - not actual supply or demand - in oil markets drove the price of gasoline from $1 to $4 a gallon (and now back to $2). Everyone else paid for the inefficient market finding a false equilibrium pumped up by perception of security.
(Financial deregulation of Wall St in 1999 preceded the popping of the dotcom asset bubble by very little lag. And then CDS in 2005 and the Great Recession and now this whole mess: and the only solution is to pay cronies who didn't hoard enough cash?)
Sugar water companies can afford to push the price of water higher while the external health and commodity costs are passed onto everyone else.
Markets have thus far failed to solve for long-term environmental damage: their incentive is to externalize costs in order to maximize short-term profit.
That's really not true in general. Market theory has been crucial in creating more sustainable resource usage in the US northeast fisheries, and the highly successful SOX and NOX emissions markets (acid rain really isn't an existential threat any longer). The US seems to be incapable of forming a sane CO2 market because of the rights intransigence and capture by fossil fuels, and the lefts reluctance to embrace a market solution/desire to overregulate (combining a methane/hfc greenhouse market with a CO2 greenhouse market is going to cause major arbitrage problems that could lead to greenhouse worsening)
(Subsidies and market theory.)
Hopefully we can utilize market economics to incentivize sustainable development and head off currently accelerating environmental destruction with costs unrecoverable in a human lifetime. Markets absolutely have not solved for global warming. Take a look around: the arctic is burning; CA is burning; the severity, frequency, and costs of weather disasters are significantly increasing.
https://news.ycombinator.com/item?id=20925127
It is denial or delusion to claim that markets have solved or will solve for long-term environmental and thus economic sustainability.
Some firms - despite the current EPA's denialism, suppression, and appeasements of special interests - have chosen to forego short-term profits in order to achieve (voluntary) Paris Agreement targets. Unfortunately, markets are hardly reinforcing that good decision. Long-term ROI is beyond the attention spans of retail and institutional investors.
Unregulated free markets have resulted in smog-filled cities and polluted drinking water in very many economies.
Europe has had carbon credits for quite awhile. That's a good first step, but it's clearly not sufficient.
There could be yearly tokens for carbon, greenhouse gases, and toxic waste (e.g. the wastewater from washing out coal plants that the current administration has decided to allow to be dumped in our rivers). Speculators and do-gooders could drive up the prices of said tokens.
Is the market choosing the most energy-efficient cryptoasset when there's virtually zero switching cost and plenty of substitute assets? No. That market, at least, is choosing the least energy-efficient alternative; and it appears that nothing but a pan-industry "you can only waste renewable energy on that speculative margin" could be expected to result in capital allocation with long-term environmental security as a rational primary objective.
Firm B: profitable, blue chip, 100% green, files (e.g. GRI) Corporate Sustainability Reports
Which investors are factoring in the most important long-term factors in portfolio development? Markets are not optimizing for sustainability: policy is necessary to counterbalance profit motive.
Are we just using markets wrong?
Nobody likes penalties more than incentives.