By Deborah Zabarenko, Environment Correspondent

WASHINGTON (Reuters) - Like oil in the 20th century, water could well be the essential commodity on which the 21st century will turn.

Human beings have depended on access to water since the earliest days of civilization, but with 7 billion people on the planet as of October 31, exponentially expanding urbanization and development are driving demand like never before.

Water use has been growing at more than twice the rate of population increase in the last century, said Kirsty Jenkinson of the World Resources Institute, a Washington think tank.

Water use is predicted to increase by 50 percent between 2007 and 2025 in developing countries and 18 percent in developed ones, with much of the increased use in the poorest countries with more and more people moving from rural areas to cities, Jenkinson said in a telephone interview.

Factor in the expected impacts of climate change this century -- more severe floods, droughts and shifts from past precipitation patterns -- that are likely to hit the poorest people first and worst "and we have a significant challenge on our hands," Jenkinson said.

Will there be enough water for everyone, especially if population continues to rise, as predicted, to 9 billion by mid-century?

"There's a lot of water on Earth, so we probably won't run out," said Rob Renner, executive director of the Colorado-based Water Research Foundation.

"The problem is that 97.5 percent of it is salty and ... of the 2.5 percent that's fresh, two-thirds of that is frozen. So there's not a lot of fresh water to deal with in the world."

WATER RISK HOT SPOTS

Over a billion people lack access to clean drinking water, and over 2 billion live without adequate sanitation, leading to the deaths of 5 million people, mostly children, each year from preventable waterborne disease, Renner said.

Only 8 percent of the planet's fresh water supply goes to domestic use and about 70 percent is used for irrigation and 22 percent in industry, Jenkinson said.

Droughts and insufficient rainfall contribute to what's known as water risk, along with floods and contamination.

Hot spots of water risk, as reported in the World Resources Institute's Aqueduct online atlas at http://insights.wri.org/aqueduct/atlas , include:

-- Australia's Murray-Darling basin;

-- the Colorado River basin in the U.S. Southwest;

-- the Orange-Senqu basin, covering parts of South Africa, Botswana and Namibia and all of Lesotho;

-- and the Yangtze and Yellow river basins in China.

What is required, Jenkinson said, is integrated water resource management that takes into account who needs what kind of water, as well as where and how to use it most efficiently.

"Water is going to quickly become a limiting factor in our lifetimes," said Ralph Eberts, executive vice president of Black & Veatch, a $2.3 billion engineering business that designs water systems and operates in more than 100 countries.

He said he sees a "reprioritization" of resources to address the water challenges posed by changing climate and growing urbanization.

Eberts' company is not alone. Water scarcity and water stress -- which occurs when demand for water exceeds supply or when poor quality restricts use -- has already hit water-intensive companies and supply chains in Russia, China and across the southern United States.

INVESTORS TAKE NOTE

At the same time, extreme floods have had severe economic impacts in Australia, Pakistan and the U.S. Midwest, according to Ceres, a coalition of large investors and environmental groups that targeted water risk as an issue that 21st century businesses will need to address.

"The centrality of fresh water to our needs for food, for fuel, for fiber is taking center stage in what has become a crowded, environmentally stressed world," said Ceres President Mindy Lubber.

A Ceres database lets institutional investors know which companies are tackling water risk. Nestle and Rio Tinto were seen as leading the way.

Water risk is already affecting business at apparel maker The Gap, which cut its profit forecast by 22 percent after drought cut into the cotton crop in Texas.

Similarly, independent gas producer Toreador Resources saw its stock price drop 20 percent after France banned shale-gas fracturing, primarily over concerns about water quality.

Food giants Kraft Foods Inc Sara Lee Corp and Nestle all announced planned price rises to offset higher commodity prices caused by droughts, flooding and other factors.

Water risk is more than a corporate concern. For international aid groups, it poses a risk of disaster for those in the path of increasing drought or rising uncertainty about water supplies.

In East Africa, for example, a changing climate could bring changes in temperature and precipitation that would shorten the growing season and cut yields of staple crops like maize and beans, hitting small farmers and herders hardest, according to an Oxfam report.

A scientific analysis of 30 countries called the Challenge Program on Water and Food offered hope. It found that major river basins in Africa, Asia and Latin America could double food production in the next few decades if those upstream work with those downstream to efficiently use the water they have.

(Editing by Sonya Hepinstall)