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Jim Jubak

Jubak's Journal8/28/2009 12:01 AM ET

3 ways to invest in water's future

In a warming world, the potential for disruption of historic weather patterns is likely to make water the new oil. Here's how to play it.

By Jim Jubak

Driving through the fields of southern Spain last week, I looked out the right-side window and saw nothing but burnt brown earth and olive trees. Out the left-side window, the fields were a vivid green.

The difference was irrigation. Spiders of pipe crawled across those green fields, spraying water on the crops.

No wonder that in Washington Irving's history of Granada's Alhambra it is the bringing of water that is so often the mark of a great king. Alhamar "introduced abundant streams of water into the city, erecting baths and fountains, and constructing aqueducts and canals to irrigate and fertilize the Vega. By these means prosperity and abundance prevailed in this beautiful city, its gates were thronged with commerce, and its warehouses filled with luxuries and merchandise of every clime and country."

And what happes to rulers who don't bring water?

Rain and politics

Look at India, where the failure of the monsoon rains threatens the rule of a Congress party that won a decisive election victory just last year. India's monsoon rains are the main source of irrigation water for the country's 235 million farmers. The government has declared 246 of the country's 600 districts affected by drought.

Recent rains have helped -- the monsoon rainfall deficit is now about 29%; in July it was a startling 44% -- but not enough to prevent huge declines in crop yields. Rice production, for example, could fall by 10 million metric tons.

Drought has brought rising food prices and extreme steps from the government. Rice exports were halted in July. The government is talking about banning corn exports -- again. The last such ban was lifted only in October. The government has offered farmers subsidies for diesel fuel to run water pumps, deferred the repayment of farm loans and cut interest payments on short-term crop loans. In addition, the country is working to get farmers to sow winter crops, including wheat, to make up for the 10 million tons of summer-sown rice lost to the drought.

India is an extreme case: About 60% of India's cropland is totally dependent on rainfall, because it isn't irrigated at all, and decades of overpumping from underground supplies have left many rural wells high and dry, above sinking water tables.

Already parched -- and it could get hotter

The country isn't alone. China's shortage of farmland is a minor crisis compared with its shortage of water, especially water where farmers need it. Most of sub-Saharan Africa seems to be sunk in a perpetual drought that has fed a numbing series of civil wars. Australia's wheat belt emerged from a drought just as Argentina entered one.

The crisis is, in fact, global. In part, it's a result of climate change. In part, it's a result of our own shortsighted depletion of our limited water resources through waste and pollution.

Continued: Some areas might see significant cooling

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