Do water and oil mix? Well, maybe figuratively as similar to oil, water is a precious commodity that our own former governor at one time looked into exporting by pipe. (See WATER BOONDOGGLES-The biggest little water plan in Texas at http://www.edwardsaquifer.net/pdf/waterplan.pdf for a hoot).
A New York Times cover story this morning (http://www.nytimes.com/2013/05/20/us/high-plains-aquifer-dwindles-hurting-farmers.html?hp) makes the Great Plains (right up to the Front Range) look somewhat like a possible repeat of 1929…. At the cusp of the stock market crash, farmers also had over invested in capital machinery/land, over produced relative to the grain market demand, and ecologically drained their production base -soil- by pulling up the century’s old ground cover to PLANT MORE. Drought exasperated the torn open dirt and blew it away. While new tillage and plowing techniques mitigated the redistribution of precious topsoil, the bulk water irrigation age was about to begin that would drain another ecologically ‘non-renewable’ resource- groundwater. This isn’t the only growing problem with ag business and water reserves, as up in the Midwest the drive to use more nitrates for boosting (often corn) crop yields has pushed green growth into the Mississippi which in turn has greatly reduced its drainage (especially at the Louisiana Delta).
Thus big pivot irrigation=>bulk water drained=>Free market failure (due to negative externality costs of ‘water’ not being internalized into the overhead of corn bushel and other crop prices on the commodity market). At first glance, ethanol as a biofuel looks comparably competitive to oil, but ground water is relatively a ‘non-renewable’ resource as it takes hundreds or thousands of years to recharge the aquifers. Simple free market (which I dearly love) failure.Market and labor readjustments, very painfully, will happen. Non-intensive water uses will utilize the land…… YET, Alaska may be poised well relative of other Southwest and Great Plains states as water is currently plentiful, and aquifers haven’t been extracted at corporate levels. And water may- in some parts of the country- be as valuable a commodity as BTU laden oil.