How Are Water Prices Determined?


Quick Answer

Water prices are determined by the process used for consumer delivery, along with a variety of other factors such as availability, brand, location of sale and container size. Tanker trucks, pipelines and bottles are common delivery methods.

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Full Answer

Basic economic principles regarding supply and demand play an important role in establishing water prices, and price acts to ration usage. As the worldwide water supply decreases, drought-ridden communities and remote areas that lack adequate delivery systems frequently pay higher rates. By increasing water rates relative to high demand or long freight routes, excess use is discouraged. In urban centers where water is not in short supply, consumers have multiple options for filling their need. Therefore, prices are decreased to encourage consumption.

Water prices are also determined administratively. Communities that rely on privately managed utility companies to deliver water by pipeline or irrigation pay tariffs. These charges are established to recover costs of water treatment, storage and wastewater processing. In parts of the world where agriculture is responsible for the majority of water consumption, some countries, such as France and Mexico, charge fees for water abstraction. This cost is typically imposed on industries, utilities and farmers to cover the expense of abstracting water directly from natural resources such as lakes and rivers.

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