Water Looms as “The Next Oil”

With U.S. gasoline prices edging toward the recently unimaginable price of $4 a gallon, consumers are beginning to drive less and energy efficiency is again a hot topic. But the pain caused by high oil prices is nothing like what looms as water, an even more basic and essential natural commodity, faces dwindling supplies and growing demand. As essential as it is taken for granted, water is The Next Oil.

It’s one thing not to be able to afford gas for the family car. People may be inconvenienced and face budget challenges, but few have to drive to survive. Water is absolutely critical for personal and public health, which is why governments have always subsidized its cost. Consumers directly pay only a fraction of the real cost of the clean drinking water that comes out of their faucets. Indeed, water is so plentiful and its delivery and quality so automatic that most people in the developed world feel as though it is free. The enormous expense of building, maintaining, and operating water systems is often as invisible as H2O itself.

For a variety of reasons, national and international attention is increasing on the vulnerability of water systems and the subsequent impacts on public health and welfare, business, and commerce. Both locally in metro Atlanta and northern Georgia and in more and more regions across the globe, drought conditions have been exacerbated if not created by increased population density and land development, which, in turn, may have been made even worse by global warming, resulting in record-setting droughts. One recent report on the human impact on oceans found that we are now using much more water than can be replenished. We also are dumping chemicals, compounds, and other waste into the system faster than the system can clean it out again. On parts of the U.S. West Coast, water has been so heavily contaminated with pharmaceuticals that people have been told not to drink it even though it has gone through treatment processes.

Skyrocketing energy prices have forced public and private response, and the same is beginning to happen with water. Public utilities are discussing how to restructure water rates to better reflect true costs without causing public harm. And the price of water is increasing; according to a recent study by NUS Consulting, municipal water has increased by more than 25 percent in price in the United States in the last five years and by more than 10 percent in Australia in just one year. Public and private users are looking internally to reduce water use and discharges of contaminants into supply systems. In 2003, for example, the Pacific Institute estimated that one-third of California’s urban water could be saved with existing technology for less than it cost to develop new sources of supply.

While such steps are clearly important, the best hope to deal with the looming water crisis may be companies looking to innovation as the means to add value not only to their bottom line, but to society at large. As water service organizations seek the most effective means to supply and protect this critical resource for their communities, they also see a significant market opportunity. For this key piece of the sustainability challenge, smart corporate thinking also can be good public policy and good business.

Water Health International, for example, uses an ultraviolet treatment technology developed at Lawrence Berkeley National Laboratory to provide clean drinking water to small and large communities around the world. In this approach, the company provides water treatment services, rather than the equipment itself, and helps each community create a set of trained professionals to operate and maintain the system. The company also provides loans for the communities to pay off system costs over time.

This is the kind of thinking and response we need. We once assumed that water is free, air is free, and power is cheap. The latter is clearly no longer true, and we are increasingly realizing the truth about water. Now is the time to make water the next opportunity for smart innovation– not just the next oil.

About the Author

MIT Sloan School of Management Professor Sarah Slaughter is vice chair of the Committee on Sustainability Infrastructure in the National Research Council, which addresses key challenges in the nation’s water, transportation, energy, communications, and waste management infrastructures.

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