The Big Drought
How drought events will shape our future going forward and will increase the cost of living.
Geographically it makes no difference where you look. Countries in all regions of the world have to struggle with periods of extreme drought. Due to climate change, one can basically assume that extreme weather scenarios will become more and more common in the future. In the case of drought, it is not only the intense heat, drying soil, low water levels and tremendous headwinds for farmers, but also what directly follows a long drought period, namely severe flooding in the affected regions as soon as there is sufficient rain again in the corresponding regions. I think this short video highlights this problem very in a very understandable way.
Now it affects everyone
Over many years water scarcity and extensive heat waves were a phenomenon we observed mostly outside of Europe. So, I think it is fundamentally important to deal with the weather conditions when you are active in the markets. Because the effects affect everyone.
Most likely this topic will be in the media for a few more weeks before the winter comes, and everyone again forgets about the crisis we face. Then once spring knocks back at the door the problem will come back up again, and people will ask again why we didn’t something to prevent this from happening—classic human behavior.
Everyone should have unlimited access to water, unfortunately, that is what we know is not the case and we tried to fix this problem over several decades without visible effort. But as these problems were most visible in emerging markets and many developing nations, the drought and water scarcity have now also shifted to Europe and the western world. Therefore, it now gets more attention throughout all the major news platforms. The good news for consumers and producers is that so far, the price of drinkable water has only risen below the average inflation number and is not correlated to food components so far. But this could become a black swan event long-term. Therefore, here are the topics that are most important to me when it comes to the latest drought.
Hydropower & electricity
Keep in mind that this heat wave is not only threatening the river passage but also has a harsh impact on the ability to generate hydropower on Europe’s way to become less dependent on fossil fuels than that’s a real challenge.