Description
This is a PPT about explores the use of water of commodity.
By: Shreya Ghorawat 2009 A32 Ojasvi Ghosal 2009 A42
Water: current scenario
? Like gold and oil, water is a commodity - and it happens to be rather scarce ? Historic increase in the public awareness of global water issues
? Not only human health but also, environmental protection and economic
development critically dependent upon the efficient management of this increasingly scarce resource
? Out of 70% of the earth's surface covered in water, only 3% is fit for human
use. Only about 1% of 3% is readily available for human consumption
? Rapid industrialization and increasing agricultural use have contributed to
worldwide water shortages. Pollution also highlights the need for clean water
? Water industry is poised for considerable growth as convergent technologies
and institutional changes combine to address the global demand for clean water
? The economic value of water will play a major role in defining the future of
water usage
Long term drivers of water use
? Population growth & urbanization ? Degradation of water supplies ? Resource sustainability ? Climate changes ? Geopolitical instability ? Aging water infrastructure ? Convergent Technologies
Investment Opportunities
? Currently being traded at various indices
? Many companies seeking a piece of the water market ? Firms seeking to profit from water-related businesses include: ? beverage providers ? Utilities ? water treatment/purification firms ? equipment makers such as those that provide pumps, valves and desalination units ? Bottled water market ? Price would be determined as a function of its demand and supply in
a market
Water: the economic good
? Need for good management of water resulting in a sustainable use of water,
making water an economic good
? Assignment of property rights difficult ? Finite amount available that must be shared in common over a variety of
uses and all over geographic areas
? Renewal of water is both stochastic and seasonal implying uncertainty in its
supply which calls for investments in infrastructure that enable to store and regulate the supply of water
? Cannot be considered as a homogeneous good - qualities ranging from
surface water to drinking water
Scarcity in water might lead in water being traded in the market as a normal good
Key determinants of demand & supply of water
? Can be used for productive as well as consumptive purposes
? Subdivisions can be made between water intensive and water extensive
producers, low and high income households and households with and without gardens
? Variability over regions, family types, housing characteristics, industrial
composition and income
? Demand also varies with various qualities of water – ? Used for drinking ? Used for washing ? Showering purposes (must be of high quality) ? For other activities such as gardening (maybe of lesser quality)
Problems for water supply
? Increased population led to an increased pressure on the limited
amount of fresh water
? Drastic increase in per capita water demand
? Technologies to desalinate water are required to transfer this water
into potable water. Up to now these technologies have been considered too costly
? Need for networks transporting water from source to user ? Industrialization and increased population have increased the
pollution of water urging for cleaning and costly water treatment facilities
Water as a Private Good-Monopoly
•Natural Monopoly due to
high capital investment
•Monopolists will create
artificial supply shortage so as to charge more
•Existence of Informal
Markets
•Black Market for water
leading to water inflation
Water Traded in Exchange
•Price Discovery
•Transaction executed only
when buy and sell order match •Negligible counter party risk •Information available freely •Equilibrium price discovered will be stable ceterus paribus
Limitations of trading Water
? Commodity need to meet specified minimum
?
? ? ? ?
?
standards(Basis Grade) Specific commodities depending on shelf life, volatility and state can be used as futures Storage of water is a problem Delivery of water might pose a problem Trading might lead to speculation Bulk of commercial trade exchanges offer soft goods rather than hard goods Unpredictability and potential huge losses associated with futures
Government Intervention
? Subsidies
? Taxes ? Regulation/Technical Intervention
? Water Credits
? Restricted Supply ? Distribution
Thank You!
doc_768159205.pptx
This is a PPT about explores the use of water of commodity.
By: Shreya Ghorawat 2009 A32 Ojasvi Ghosal 2009 A42
Water: current scenario
? Like gold and oil, water is a commodity - and it happens to be rather scarce ? Historic increase in the public awareness of global water issues
? Not only human health but also, environmental protection and economic
development critically dependent upon the efficient management of this increasingly scarce resource
? Out of 70% of the earth's surface covered in water, only 3% is fit for human
use. Only about 1% of 3% is readily available for human consumption
? Rapid industrialization and increasing agricultural use have contributed to
worldwide water shortages. Pollution also highlights the need for clean water
? Water industry is poised for considerable growth as convergent technologies
and institutional changes combine to address the global demand for clean water
? The economic value of water will play a major role in defining the future of
water usage
Long term drivers of water use
? Population growth & urbanization ? Degradation of water supplies ? Resource sustainability ? Climate changes ? Geopolitical instability ? Aging water infrastructure ? Convergent Technologies
Investment Opportunities
? Currently being traded at various indices
? Many companies seeking a piece of the water market ? Firms seeking to profit from water-related businesses include: ? beverage providers ? Utilities ? water treatment/purification firms ? equipment makers such as those that provide pumps, valves and desalination units ? Bottled water market ? Price would be determined as a function of its demand and supply in
a market
Water: the economic good
? Need for good management of water resulting in a sustainable use of water,
making water an economic good
? Assignment of property rights difficult ? Finite amount available that must be shared in common over a variety of
uses and all over geographic areas
? Renewal of water is both stochastic and seasonal implying uncertainty in its
supply which calls for investments in infrastructure that enable to store and regulate the supply of water
? Cannot be considered as a homogeneous good - qualities ranging from
surface water to drinking water
Scarcity in water might lead in water being traded in the market as a normal good
Key determinants of demand & supply of water
? Can be used for productive as well as consumptive purposes
? Subdivisions can be made between water intensive and water extensive
producers, low and high income households and households with and without gardens
? Variability over regions, family types, housing characteristics, industrial
composition and income
? Demand also varies with various qualities of water – ? Used for drinking ? Used for washing ? Showering purposes (must be of high quality) ? For other activities such as gardening (maybe of lesser quality)
Problems for water supply
? Increased population led to an increased pressure on the limited
amount of fresh water
? Drastic increase in per capita water demand
? Technologies to desalinate water are required to transfer this water
into potable water. Up to now these technologies have been considered too costly
? Need for networks transporting water from source to user ? Industrialization and increased population have increased the
pollution of water urging for cleaning and costly water treatment facilities
Water as a Private Good-Monopoly
•Natural Monopoly due to
high capital investment
•Monopolists will create
artificial supply shortage so as to charge more
•Existence of Informal
Markets
•Black Market for water
leading to water inflation
Water Traded in Exchange
•Price Discovery
•Transaction executed only
when buy and sell order match •Negligible counter party risk •Information available freely •Equilibrium price discovered will be stable ceterus paribus
Limitations of trading Water
? Commodity need to meet specified minimum
?
? ? ? ?
?
standards(Basis Grade) Specific commodities depending on shelf life, volatility and state can be used as futures Storage of water is a problem Delivery of water might pose a problem Trading might lead to speculation Bulk of commercial trade exchanges offer soft goods rather than hard goods Unpredictability and potential huge losses associated with futures
Government Intervention
? Subsidies
? Taxes ? Regulation/Technical Intervention
? Water Credits
? Restricted Supply ? Distribution
Thank You!
doc_768159205.pptx