Oil dominates the world economy. But get ready. There's a new liquid in town -- one that could prove to be an equally potent source of both geopolitical conflict and entrepreneurial activity.
By 2025, water will become the most serious resource problem in the world economy, according to the Center for Strategic and International Studies, a Washington think tank. The problems are twofold, researchers say.
First, the supply of water and the demand for it are rarely in the same place. For example, China has about 21 percent of the world's population but only 7 percent of its water.
Second, an astonishingly small amount of the world's water is actually usable. Water pollution is already the single largest cause of sickness and death worldwide. Indeed, CSIS's Global Strategy Institute says if all the water on Earth were compressed to a single gallon, only four ounces would be fresh water. Of that four ounces, only two drops would be readily accessible.
Human beings already use one of those drops. But about 92 percent of that single drop goes to agriculture and industry; just 8 percent goes to cities, towns, and municipalities. Think about that: For every gallon of water on the planet, only 8 percent of one drop is available for drinking, bathing, and other personal consumption.
As the world population rises -- particularly in China, South Asia, and parts of Africa -- the potential for calamity and conflict soars. But where danger exists, so does opportunity.
Water may be one of the richest investment opportunities of the next few decades. Any company that can improve desalinization techniques, find methods to transport water from where it's located to where it's needed, or figure out other ways to expand the useable water supply from less than a drop to, say, three or four drops might become the Shell or BP of H20.
In an excellent research report last month, UBS Investment Bank spells out the perils and promise of this emerging opportunity. The report notes the considerable uncertainty surrounding water investment but recommends four equipment and services stocks that are providing the "picks and shovels" in the pursuit of the new liquid gold. They are: Air Products and Chemicals, which does water treatment; Nitto Denko, a producer of separation membranes for refining and condensing water; Guangdong Investment Limited, a water utility; Pall Corp., which designs and manufactures filtration products.
Of course, nobody knows which specific companies will become the big kahunas of this field. But the broader strategy is obvious: To grow your portfolio over the long term, be sure to water it.
