This analysis comes from a study I recently published at the Baker Institute for Public Policy, and I share the Executive Summary here, along with a link to the full paper.
I don’t normally include articles examining water issues outside of Texas, but this particular one is extremely relevant to the food-water-energy tradeoffs we face here in the Lone Star State, so I make an exception. Strain points in the global food-energy-water nexus are a challenge that impacts many populous and economically dynamic areas globally, including Texas and the many states west of the Mississippi River that are collectively responsible for the lion’s share of U.S. agricultural output.
–In the Arabian Gulf region, energy resources generate export revenues, a meaningful portion of which are then used to subsidize food, water, and energy prices paid by local consumers.
–Such policies deeply embed energy in the food-water-energy relationship. Pressure on one strand of the nexus generally affects both of the other two. In addition, food, water, and energy (here, oil and gas) are three of the world’s most politicized commodity groups, which further complicates policymaking.
–Each tonne of wheat grown in an arid climate like that found in much of the Gulf Cooperation Council region can consume approximately 2,634 cubic meters of water—roughly the same amount needed to fill an Olympic-size swimming pool.
–Pumping this volume of water from 1,000-meter-deep wells would require the use of roughly 10,000 kWh of electrical energy, equivalent to an estimated 7 barrels of crude oil, 3.8 barrels of diesel fuel, 1.1 barrels of fuel oil, and nearly 33,000 cubic feet of natural gas, once efficiency and transmission loss factors are included.
–Such energy-intensive water extraction means that in the GCC region, the opportunity cost ratio of using exportable hydrocarbons to support domestic grain cultivation can exceed 3:1. In other words, each tonne of wheat grown domestically with deep groundwater can effectively cost three or more times what it would cost to procure that same tonne from the global market.
–Using desalinated water would yield an even more extreme energy requirement of as much 47,000 kWh of energy per tonne of wheat produced: roughly 26 barrels of crude oil per tonne of wheat grown.
–In a nutshell, grain cultivation in a severely arid climate like the Arabian Gulf requires at least two orders of magnitude more energy per tonne of grain produced than would be the case in a temperate climate like Canada, Russia, Ukraine, or the United States where rainfed farming dominates.
–In the hypothetical case of using desalinated seawater to produce grain, there would be an increase of energy intensity of nearly three orders of magnitude between the temperate countries and the Arabian Gulf (i.e., roughly 5 kWh/tonne versus nearly 50,000 kWh/tonne).
–To bolster its food supply security, Qatar would be best off foregoing significant domestic grain cultivation and instead expanding strategic grain supplies, becoming a financial investor and/or physical participant in farming operations abroad, and expanding its domestic grain milling capacity.
–With proper inputs, agricultural land is effectively a renewable resource that yields rents on an annual basis over time, unlike hydrocarbons, which can only be extracted and sold once. Such renewability could allow Qatar to leverage its financial resources to acquire larger farmland stakes abroad and develop an independent source of national income to help diversify and reduce the country’s dependence on oil and gas revenues.
–Investing capital to create more productive and efficient farming assets would also help bolster Qatar’s own food supply security as well as increase global grain supplies. Doing so could advance Qatari diplomacy by demonstrating the country’s intent and capacity to serve as a positive geo-economic influencer on the world stage.
–The renewable rents from investment stakes in professional farmland managers can also be substantial. For instance, the enterprise-wide earnings before interest, tax, depreciation, and amortization (EBITDA) margin of South America-focused farmland developer and farming company Adecoagro consistently exceeded that of Rosneft between 2012 and 2015, and in some years, surpassed Google’s EBIDTA margin. The Qatar Investment Authority held a 12.7% stake in Adecoagro as of January 2017, according to company filings.