February 6 (Bloomberg) -- The Earth's surface is mostly water, yet across increasingly large swaths of the planet, H2O reservoirs are drying up. This isn't a metaphor, and it's not hyperbole. It's a fact that's changing the destinies of companies and nations.
Three of the world's greatest rivers, the Colorado in the U.S., the Nile in Egypt and the Yellow River in China, have been so depleted by cities, farms, factories and dams along their banks that they often no longer reach the sea. Growth in the desert city of Las Vegas, which depends on Colorado River water contained by the Hoover Dam, has been stunted not only by a spectacular real estate crash, but by a 46 percent drop in the amount of water in Lake Mead, behind the dam. Simply put, there's no more water to be taken.
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It's not that the world is running out of water, says Peter Gleick, president of the Pacific Institute, an environmental research organization in San Francisco. It’s that there's not enough water where it's needed, and it can't be easily transported. Globally, the amount of renewable water available for each inhabitant has dropped from over 10,000 cubic meters in 1990 to 7,770 in 2010. It could trickle to 4,870 by 2050, as the world's population grows.
"There are limits to how much water we can get and use, and how we use it and where we use it," Gleick said. "People think of water as a renewable resource, and mostly it is. But there are very important nonrenewable stocks of water that society depends on."
Gleick coined the term "peak water" and in 2010, with colleague Meena Palaniappan, laid out the case that much of the world -- the U.S. especially -- may have already passed its greatest possible rate of consumption. Citizens, government and business must realize that the taps are about to slow.
China's 'Growth Dilemma'
The limitations of the world's water supply and mankind's unquenchable thirst for fresh water collided in China last year, when the National Iron and Steel Association decided there wasn't enough water for the steel mills around Beijing to continue at their current growth rate. Under China's five-year plan -- an anomaly of forethought among nations -- Beijing mills responsible for a fourth of the Chinese steel production were told to stop expanding in the water-starved capital and move to the coast. There they'll use desalted seawater to cool hot steel from the furnaces.
China's North has just a fifth of the country's water to supply nearly half its population and industry. The North is also home to most of China's vast coal reserves, which require tremendous amounts of water to extract and transport. Already, water pollution combined with a shortfall of about 40 billion cubic meters a year in available fresh water have have sapped China’s growth by 2.3 percentage points, according to a recent World Bank estimate.
Water will be China’s “next growth dilemma,” said Su Gao, water analyst at Bloomberg New Energy Finance.
In the U.S., rising temperatures and decreasing rain and snowfall in the U.S. Southwest are drying up the Colorado, the region’s lifeline, and will make the current use of water from the Colorado “unsustainable” in the future, according to a team of climatologists from the Scripps Institution of Oceanography and the U.S. Geological Survey, writing in the Proceedings of the National Academy of Sciences in December 2010. While couched in the cautious terms of science, there was no mistaking the study’s conclusion: Drought will become “more extreme” by the middle of this century, “call[ing] into question whether we can sustain the water resources that we have come to depend upon in the 20th century.”
A growing school of thought suggests that, as with traditional oil supplies, the world has surpassed its peak water availability, where it will be ever more expensive to obtain the next gallon of water we need. Sure, rainfall will replenish some rivers, he says, but in key sources like the Colorado that feeds the American West, the hydrological cycle can no longer keep up.
Trickling rivers and sinking lakes are the most visible examples that the availability of water has passed its peak while demand still grows. The worst threat to water supplies is the overuse of underground reservoirs. Some 30 percent to 40 percent of the world's food is irrigated with groundwater from once-ample aquifers that took millennia to fill. These irreplaceable deposits are being depleted in a matter of decades, leaving behind withering tomato fields in Mexico's Baja California and dusty plains in central India.
Dwindling rivers and sinking aquifers are going to stymie growth in some areas and cause major shifts in industry and population as people and business chase the least mobile raw material they all need -- water, said Will Sarni, who leads Deloitte Consulting's Sustainability and Climate Change Practice.
Expect chipmakers and gas drillers to head for the U.S. Northeast where water is abundant enough to feed both manufacturing and the newly exploited shale gas fields that run under Pennsylvania, New York and Ohio, said Sarni, who advises Deloitte clients on strategies to cope with the world’s dwindling water supply. "Water can behave as a finite resource in individual watersheds," Sarni said.
For companies, like Coca-Cola, that see endless opportunity for new customers amid the expanding middle classes in developing countries, water risk is paramount. In the past two years, Coca-Cola built 320 rainwater harvesting structures in 17 states as it expanded in India. Worldwide, the company has reduced its water use per sales by more than 30 percent in the last five years, according to company data.
In southern Texas, a multiyear drought is hitting natural gas prospectors whose wells can each use as much as 13 million gallons of water -- enough to satisfy a town of 240 people for a year. The Edwards Aquifer Authority, which oversees underground water supplies around San Antonio and the northern edge of the oil fields, ordered a 30 percent cut in water usage last summer after nearly a year with only 2 inches of rain.
Demand for water used in the extraction process, called hydraulic fracturing, or fracking, will jump 10-fold by 2020, and double again by 2030, said Robert Mace, a deputy executive administrator of the Texas Water Development Board. That may be more water than the region’s depleted aquifers and the Rio Grande can supply.
Semiconductor plants, toilets and clothes washers have cut their water usage by as much as two-thirds in the past two decades, said Gleick, and industry can do more to reduce its water use. Ultimately, just as New England’s early industrialists built their mills along the area's fast-flowing rivers in the 19th century, today’s businesses will move to where they have the resources they need most.
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