Water Flowing Down Wall Street

Water scarcity is a perennial problem with dire consequences for the United States and governments around the world. A lack of adequate water resources is a systematic cause of environmental harm, economic damage, and societal division. Climate change has exacerbated these problems making water even more valuable and essential. Financial actors have turned water into the new oil. These large financial actors profiteer from buying and selling water without any interest in its actual use as an input of production. Instead, they typically seek to hold these rights until dire situations, like droughts and fires, cause temporary, but large, spikes in the value of water. Speculation may not only drive water prices up, but it can also lead to greater concentrations of market power. Such concentrated control raises serious concerns about the rights of governments and consumers to essential resources. This Article argues that current water law is ill-equipped to respond to the pathologies of financialized water. This Article is the first to call attention to these new actors by diagnosing the problems, illustrating them with current case studies from different jurisdictions, and suggesting principled avenues for reform of water regimes to rein in speculation and concentration. The reforms proposed in this Article aim to ensure that water management is efficient, fair, and environmentally friendly. In particular, this Article argues that jurisdictions should consider the role of communities in transactions, reinforce institutional control and antitrust measures in water markets, and limit the amount of water rights any single actor can hold. The Article also draws lessons about how other scarce resources at risk of financialization can be better managed.