VIDEO-Why trading water futures could be in our future

So the question is, Will this most precious commodity become a traded resource that will be bartered for, and traded on a futures exchange, much like oil, corn or gold?

"It's intuitively appealing to talk about water as a traded asset. If you look at projections over the next 25 years, you'll see that global water supply and demand imbalances are on track to get worse," said Deane Dray, a Citigroup analyst who heads up global water-sector research. "The majority of the world population is living in water-scarce and water-stressed regions of the world. "

But Dray and other experts say trading water will be difficult, as water supply is ultimately a local issue all over the world.

"I don't see how you would do it. Water's regulated locally. It's regulated in every state. You can't put a pipe in a waterway and start selling it somewhere else," said Robert Kennedy Jr., president of Waterkeeper Alliance, which promotes watershed protection globally. "The waterways are owned by the people of the state."

History is full of examples where water diversion led to wars or environmental tragedies. The former Soviet Union diverted rivers for crops in the 1960s, ultimately drying out the Aral Sea in Central Asia, where fishing boats are now stranded on dry land.

"Anything that ships water as a commodity out of a watershed would be extremely disruptive environmentally, and it would be disruptive to democracy and the public trust. We've already seen water wars all around the world because of companies trying to do that and governments trying to do that," Kennedy said.

The Middle East has seen many conflicts over water, including in Syria. The Euphrates River has long been a source of conflict between Turkey and Syria, and in the last month Turkey turned off the tap, affecting water flow to Syria and Iraq.

Kennedy said Western law, dating back to Roman times and even the Magna Carta, stated that water belongs to the people.

"Water is a multitrillion-dollar industry now, according to the World Bank, and because it is a commodity that is vital for human life and we're experiencing global shortages because of global warming and population growth ... it's something [that] people will try to figure out a way to commoditize and sell," Kennedy said. "The best measure of how a democracy functions is how the government distributes the goods of the land."

That would include waterways, fisheries, wildlife and public land.

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"Economists like the idea of trading [commodities] freely. The process increases economic efficiency," said Professor John Reilly, co-director of the Joint Program on the Science and Policy of Global Change at the Center for Environmental Policy Research at MIT Sloan School of Management.

"In terms of large-scale international trading of water, we already have bottled water moving around. I think its more likely we will see desalinization and other sorts of things—such as water reclaimed, cleaning up and recycling of water—before we see large-scale trading of massive amounts of water, because it would be expensive to move," said Reilly. He said a solution to lack of water may be to move activities that require water, like crop production and manufacturing, from dry areas to wetter regions.

http://www.cnbc.com/id/101789481