Will H20USD be the next CFD we see in our trading platforms? – Guest Editorial

By James Glyde, Head of Business Development for Spotware Systems

James Glyde is the Head of Business Development for Spotware Systems, developer of the Multi Asset Class cTrader Suite. In this Op Ed James takes a look at an ongoing environmental issue and how droughts are not exclusive to developing countries with inferior infrastructure but infact pose a risk to the developed countries in which we live.

As I write this Op Ed from the sun blessed Mediterranean island of Cyprus life seems fantastic and one of the last things on my mind is the worry that I will ever go thirsty for more than half an hour. While summers here are aggressive, in January of this year we experienced a soggy month leaving the coastal road of Limassol almost knee high with rainfall. Reservoirs were below 50% capacity by the end of march this year and only in 2008 Cyprus was importing tanker ships of drinking water to supply its residents.

While Cyprus is a small island in one of the most southern parts of the Mediterranean, surrounded by near useless salt water, the occasional drought is hardly surprising. This case is far from isolated, the great state of California is in an imminent state of drought and has been for four years, mostly relying on limited and irreplaceable aquifers typically used for agriculture but now relied on by Californian residents.

The issue in California is clouded by a lack of transparency as underground water drilling records are kept hidden from the public, scientists, conservationists and legislation writers which could leave California in a far less desirable state, if conditions don’t take a turn for the better.

The state of California’s most noteworthy products are Oranges, Grapes and Almonds along with many others, despite the imminent danger of being left not too dissimilar from one of the unforgiving sandy deserts located in North Africa or the Middle East many farmers whose land is yet to become barren continue to produce water intensive crops to maintain their heritage and persist using their expertise and farms physical resources.

It wasn’t long ago when Saudi Arabia, currently the second largest oil producer was on track to becoming one of the world’s largest wheat producers in an aid to become self sufficient. Their production peaked in 1992. After realising how damaging this goal was to their Kingdoms essential aquifers they made a strategic u-turn to reduce dependency on their precious resource, something they are yet to do with oil, clearly placing a higher value on water.

Richard L. Sandor, a name that many will have stumbled across having driven the creation of some of the largest pillars of the financial services industry having held the position of Vice President of the Chicago Board of Trade (CBOT) and involving himself in countless environmental projects. Sandor has been titled as the “Father of Financial Futures” and the “Father of Carbon Trading” making him a valid voice to listen to when he states: “I do believe [water] will be the commodity of the 21st century.”

This issue is shared by many other states across America whether this be caused by drought or pollution, drinking water is running scarce. The current price of water in California sits at just $1.55 per hundred cubic feet of water (according to the Wall Street Journal). While the same volume of water in London would cost £56 + services (according to Thames Water calculator), needless to mention the copious rainfall and lack of sunshine there in the United Kingdom.

Despite the arduous task of supplying water to one of the most desirable states, it’s business as usual in California, with little incentive to install water saving mechanisms and change personal habits. Water remains cheap and the fines issued to offenders of using water for sanctioned tasks are hardly intimidating. If water was priced sufficiently, would this still be the case.

Since authorities in the US or any other nation know very little about what resources lie beneath the surface, quite similar to the world’s oil resources, is it only a matter of time before water is no longer classified as a public good and H20USD become the newest commodity we see in our trading platforms?

If this economic and environmental topic is of interest to you, I can recommend a good watch, it is a 2008 documentary called “Blue Gold: World Water Wars”, the full movie can even be found in YouTube or below.