“The New Oil” privatizing global water supply chains

The Oct 18, 2010 edition of Newsweek has an article titled “The New Oil” and describes a private supply chain to take water from Sitka, send it to a bottler near Mumbai, India for sale to customers in the Middle East. The article goes on to describe several examples of private companies managing water resources and identifying the most desirable customer globally. Given that humans need water to survive, reducing consumption cannot happen beyond a point.  The consequent price changes thus generate a disproportionate impact on poor customers.  Will water become the commodity to cause conflict in the future ? Should the focus on conservation, market based solutions, technology to desalinate etc become as desirable as the current emphasis on sustainability ? Will global supply chains enable or increase the complexity of creating an effective market for water ? What do you think ?

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About aviyer2010

Professor
This entry was posted in Global Contexts, Supply Chain Issues, Sustainability and tagged , , , , . Bookmark the permalink.

One Response to “The New Oil” privatizing global water supply chains

  1. Richard Ingle says:

    Water is in some respects like any other commodity in that it is a resource that people will and do pay money for and has a limited supply but at the same time is so unique that the UN recently confirmed that to have it is a basic human right. Free markets can normally be relied upon to optimise the efficiency of allocation of resources although rarely the equity of this allocation. With water it is most difficult to have a genuinely free market due to the monopoly-favouring economics of the infrastructure for its purification and transportation. Given systematic imbalances in monetisable resource allocations between individuals and natural resource allocations between countries it is often impracticable to have a purely market-driven allocation of water resources. In a world of dwindling water resources compared to essential needs the potential for conflict between “haves” and “have nots” is massive given these initial resource allocation imbalances. Market-based mechanisms to reward thrift in water usage and punish waste through for example leaking pipes are an essential part of the solution but can only be one part. Clear remuneration mechanisms are essential in order to attract necessary private investment for desalination plants. Global supply chains that move water resources from high surplus to high demand areas can also be very helpful in relieving demand and supply mismatches and therefore the marginal cost in supplying water to where it is needed. Price is the most powerful method of regulating demand but there are socially acceptable limits to how far this can be taken, as demonstrated in the Newsweek article by the example of water riots in South America. Government directed investment and international co-operation is required, in combination with local and trans-national pricing mechanisms, in order to be able to peacefully allocate finite water resources to those in need of them

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