The only certain thing about speculation in commodity markets is that assets bought and sold there later become subjects of conflict and war.
Wall Street has begun to pave the way for the wars of the future. Those wars will be fought over one of the most important, or perhaps the most important asset that any country may have: Water.
Speculation with one of the most scarce resources in the world, capable of generating wars, strange geostrategic alliances, or legions of environmental refugees when it is lacking, and also when it rains too much.
The idea that speculating with water would somehow lead to a more proper use through proper management and timely satisfaction of the needs of sectors as diverse as agriculture, industry, or urban planning is preposterous.
Politicians and speculators are now talking about “water inclusion” as a term to validate their thirst for water, a precious commodity of which we only have 2.5% fresh of the total existing on the planet. As a new commodity, in the futures market, such as gold. or wheat, water will undoubtedly become a matter of conflict.
That is, the H₂O has a new market value. Backbone factor, by excess or defect, of numerous episodes of climate warming, such as the terrifying fires in California, water will now be subjected to management governed by the logic of speculators that for many is an invitation to massive conflict, as they sell us the idea that speculation itself will guarantee preservation when water becomes scarce.
The announcement has not left anyone indifferent, from economists to environmental organizations.
The liquid element began trading last week on the Wall Street commodity futures market due to its “scarcity”, according to the Nasdaq Veles California Water (NQH2O) index, which was created in 2018.
This indicator is based on the prices of water futures in the State of California, which on the 7th was trading at about $486.53 per acre-foot, a measure equivalent to 1,233 cubic meters.
In other words, 40 cents, almost half a dollar, per cubic meter, an exorbitant amount indeed.
More than the volume of water, the NQH2O index will regulate the rights of use.
In fact, the NQH2O is based on the prices of the main river basins of California, where the scarcity has increased to multiply the price of the cubic meter by two in the last year and where progress had been made in precursor forms of a formal market that now arrives at its final steps.
Based on the experience of the western United States, this value can be used as a reference for the rest of the world in the water markets.
The North American country is the second world consumer after China; population growth and accelerated economic development also explain scarcity, speculators say.
The NQH2O index is heralded as an innovative and pioneering tool – the first of its kind – for agricultural, commercial or municipal supply, but in reality, it is just Wall Street attempting to take power over the only other element that sustains life on planet Earth.
“With nearly two-thirds of the world’s population exposed to water scarcity in 2025, its lack represents a growing risk for companies and communities around the world, and especially for the California water market, which accounts for some 1.1 billion dollars. dollars,” said Tim McCourt, head of CME, the world’s most diverse derivatives market, when the index was released.
In fact, 75% of the water consumed today in California, the largest water-consuming state in the country, is used to irrigate the nine million acres of existing crops. In other words, those who control water markets and water supply will control the food market, and those who control the food market and food supply, control everything else.
CME is promoting, together with Nasdaq, the initiative. “Developing risk management tools that address growing environmental concerns”.
This new type of water contract is based on the collaboration with Nasdaq, as well as on CME’s alleged proven experience of 175 years advising in the reduction of risks in essential commodities in diverse markets, such as agriculture, energy and metals, indicated McCourt.
For Nasdaq, the initiative is due to “an attempt to provide greater transparency in the management of an important natural resource, according to Laurent Dillard, executive vice president of the company, quoted by MarketWatch.
Speculation brings artificial scarcity
If one of the objectives of the futures market is to minimize as much as possible the volatility of raw materials exposed to imponderables, such as drought, fires or any natural catastrophe, and tie its price to foreseeable limits, it is easy to see how water market price speculation will have the opposite effect of what is being proposed.
One has to look at other natural, limited resources and how their value has been manipulated in commodity markets to recognize that speculation with water prices will contribute to increasing, not reducing conflicts derived from its distribution and use since an artificially proposed price will not represent the need to have access to water, but to concentrate its property into the hands of those who can buy large volumes of it.
Price agreements do not achieve the goal of making water accessible to those who needed most but do make it more expensive and legitimize control of this resource in the hands of the cartel that dominates water market speculation. As a result, there will be more industrial and agricultural overexploitation of the resource.
The kind of artificial scarcity that will result from speculation, is already causing concern among environmental organizations. “The activity of hedge funds that bet on water scarcity is dangerous.
Speculation has no place in the responsible management of water, a basic human right and a fundamental natural resource that should be a public trust for all.
“We have seen in serious cases of contamination how market mechanisms transfer the damage to low-income areas and communities of color and the benefits to corporations and wealthy areas,” explains Mary Grant, director of the Water for All from the Washington-based Food & Water Watch organization.
In the United States, the precedent is clear: the polluted water scandal in Flint (Michigan), due to the supply of cheap water with high levels of lead to a predominantly black population. “When investors control the water, people inevitably suffer. The financialization of water is a threat to this fundamental human right ”.
The UN Special Rapporteur for Water, Pedro Arrojo, emeritus professor of Economic Analysis, argues that it is important not to confuse value and price: the minimum necessary to live with dignity is not worth the same as that used to fill a swimming pool.
“From my point of view, and from the point of view of the UN, water cannot be considered a simple commodity and, therefore, in 2010 water and sanitation were recognized as human rights,” he explains.
“If, as a result of speculative maneuvers, oil rises excessively and we have difficulties filling the tank, it would be a problem, but we will be able to get around on foot or by public transport; but if we lack water, we simply cannot live. That is why oil is not a human right and water is. The important thing about water is not its materiality, H₂O, but what we use it for ”.
The serious global food crisis of 2008, after the food futures markets became a safe haven as a result of the bursting of the housing bubble and the financial crisis, is a precedent to take into account in the case of water.
“It is estimated that the large banks invested some 320,000 million dollars in record time in these markets, fueling an excessive growth in prices, the purpose of which had nothing to do with improving efficiency in the sector, nor of course improving the accessibility of food to impoverished sectors.
Specifically, wheat quintupled its price in a few months. In just three years, the average price of food in the world increased by an average of 80% and in the order of 250 million people swelled the ranks of hunger ”, recalls Arrojo.
Could it happen now with the water?
The entry of water as a simple raw material in the futures markets increases and catalyzes the risks of speculative mechanisms operating on a large scale. If we want to have a reference, we only have to analyze what happened in 2008 with food products.
From the water war in Bolivia to the megalomaniacal projects of China or Turkey to dam it, passing through its privatization in Chile, with 1% of the owners possessing 80% of water destined for consumption, there are hundreds of examples of disputes related to access to water.
With the H₂O as the new market value, the battlefield shifts to the trading floor.