Water: Cycles

How a wet winter crashed California's water price

Most water tariffs are set by regulators, so cycles show up as scarcity rather than price. Where water trades freely, prices swing with drought. California's NQH2O index rose from about $225 per acre-foot in early 2020 to a peak of $1,282 in September 2022, then fell to $156 by July 2023 after a very wet winter. It was $522 in late October 2026 (Nasdaq via FRED). In India the monsoon sets the cycle: weak rains raise groundwater pumping and lower water tables. Dry years also cut hydropower, thermal power-plant cooling and crop output.

California water (NQH2O index) price

Chart: California water (NQH2O index) monthly price

Super-cycles in water

Water has no global price and so no super-cycle in the usual sense. Most water is priced by regulators and politics, well below its scarcity value, and tariffs move slowly: Bengaluru's 2025 revision was its first in 11 years. Where rights trade, prices follow drought cycles of a few years rather than decades. California's NQH2O index, the only public benchmark, ranged from $156 to $1,282 per acre-foot between 2020 and 2023 (Nasdaq via FRED). The long trend is rising scarcity: withdrawals per person fell 7% between 2015 and 2022 while total withdrawals were flat, and renewable water per person fell 7% (FAO). Climate change makes droughts and floods more extreme, which raises the value of storage.

1. 2020 (California, dry spring)

   A dry winter and low reservoir allocations pushed up spot prices for traded water as farmers in the Central Valley competed for supply.

   NQH2O rose from about $225/acre-foot (Feb 2020) to $704 (10 Jun 2020) (Nasdaq via FRED).

2. 2021-2022 (California mega-drought)

   Two very dry years cut surface deliveries and forced heavy groundwater pumping; buyers paid record prices for any transferable water.

   NQH2O climbed from $530 (mid-Mar 2021) to a record $1,282.07/acre-foot on 14 Sep 2022; the 2022 average was about $968 (calculated from Nasdaq data via FRED).

3. 2023 (wet winter)

   Atmospheric-river storms refilled reservoirs and snowpack, and scarcity vanished within months.

   NQH2O fell from $1,129 (4 Jan 2023) to $156 (26 Jul 2023), down about 86% (Nasdaq via FRED).

4. 2024-25 (Murray-Darling Basin)

   After three years of falls, the southern Murray-Darling entitlement market recovered as government buybacks for the environment returned and storages saw their largest in-season drawdown in over two decades (5,023 GL).

   Entitlement market value about A$31.9 billion, up 3%; allocation prices averaged A$153 per ML, with major zones 89-159% higher at year end (Ricardo, Aug 2025).

5. 2026 (California)

   Prices rose again through the summer irrigation season, showing how quickly scarcity returns after a run of average years.

   NQH2O rose from $208.73 (Apr-May 2026) to $583.68 (9 Sep 2026), and was $522.38 on 28 Oct 2026 (Nasdaq via FRED).

What drives the cycle

• Precipitation, snowpack and reservoir storage. Set seasonal allocations in California and Australia, and so spot prices of traded water.
• Indian monsoon. Weak monsoons raise groundwater pumping and lower water tables; 87% of India's groundwater use is irrigation (CGWB 2025).
• Population and urban growth in dry regions. WRI expects global water demand to rise 20-25% by 2050, with 1 billion more people under extremely high stress (Aqueduct 2023).
• Regulation of groundwater and environmental flows. Pumping limits (such as California's groundwater law) and buybacks for rivers shift water from farms and raise market prices.
• Electricity prices and electrification. Desalination uses 2.5-6 kWh/m³ (IEA), so power costs set the ceiling price of new supply for coastal cities.

Metrics to track