Posthaste: There’s a new crisis looming in a commodity 400 times bigger than oil

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It’s something we use everyday — couldn’t survive without, actually — and often take for granted.

Yet freshwater could run out by 2040 at our current rate of consumption, says a report by BofA Global Research.

“Some 75 per cent of our planet is covered with water, yet less than 1 per cent is usable, and even this is depleting quickly,” said BofA equity strategists led by Haim Israel.

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Water is the most ‘traded’ commodity in the world, with the “virtual water trade” 400 times as big as oil, says the report.

Use is up 40 per cent over the past 40 years and is estimated to go up another 25 per cent by 2050, but supply has more than halved since 1970, according to the World Bank.

Why is this happening?

We are in an era of “hyper consumption,” where the production of fast fashion, food and technology suck up vast amounts of water.

Manufacturing one T-shirt takes the water equivalent of three weeks’ worth of showers; one steak, 3.5 months of showers, said the report. Data centres, which need cooling, are the 10th biggest water consumer in the United States and “ChatGPt ‘drinks’ a litre every 40 commands.”

Water demand already surpasses population growth by 1.7 times, and by 2050 the world’s population is expected to hit 10 billion.

Agriculture remains the world’s biggest consumer of water, with meat production taking the lion’s share. To produce a person’s daily food takes between 2,000 and 5,000 litres of water.

The energy sector is another heavy user, taking up 75 per cent of industrial water use.

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Shortages are already visible, says the report. Already half the world’s population suffers high water stress at least one month of the year.

In 2021, droughts in Taiwan held up semiconductor production, (a semiconductor factory consumes about as much water as a city of 58,000) and water extraction from aquifers in Mexico for avocado farming is now causing earthquakes.

The economic impact could be huge. About US$70 trillion of global gross domestic product, or 31 per cent, could be exposed to high water stress by 2050, up from US$15 trillion in 2010, with India, Mexico, Egypt and Turkey accounting for half of that. As competition for water increases, the World Bank predicts that some regions will see GDP decline by 6 per cent in less than 30 years.

To change the course we’re on, investment in preserving the world’s water supply needs to increase fourfold, says BofA.

“The good news is it would cost only 1 per cent of GDP p.a. till 2030 to solve the global water crisis,” says the report.

The strategists map out $200 billion in water solutions, starting with infrastructure as the first line of defence. Much of America’s water system is 50 years old and a third of all fresh water running through pipes is lost to leakage.

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Technology such as smart meters and AI could cut waste in water management and irrigation. Desalination already accounts for 90 per cent of drinking water in some countries and the sector is predicted to reach $33.3 billion in 2030.

According to the World Bank, every dollar invested in water access and sanitation could generate $7 in returns.

While there has been growing mobilization on water security, “ultimately, we need for water what we have for climate change,” — a global goal underpined by national action plans, said the report.

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Insolvencies are on the rise after the lows of the pandemic. Today’s chart by BMO economist Shelly Kaushik shows the pickup after the initial pandemic drop and then the acceleration once the Bank of Canada began hiking interest rates in 2022.

Most of the total insolvencies are consumer but one worrying trend is that business insolvencies have now surpassed their pre-pandemic level, said Kaushik. Another is that the worst of the insolvency climb is likely still to come as the impact of higher interest rates continues.

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• Bank of Canada senior deputy governor Rogers speaks in Vancouver
• Today’s Data: U.S. initial jobless claims
• Earnings: Canadian Tire, CI Financial, Rogers Communications, Quebecor, IAMGOLD, Saputo

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Canadians are starting to care more about a pension plan than pay rises, surveys reveal. Almost 75 per cent of workers believe employers should offer some kind of retirement savings option and 65 per cent say they’re unhappy with their current benefits packages — pension plans included. Find out more about people are looking for and what employers are offering at FP Work.

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Today’s Posthaste was written by Pamela Heaven, @pamheaven, with additional reporting from The Canadian Press, Thomson Reuters and Bloomberg.

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