Earlier this year the media made much ado about drought conditions constraining traffic through the Panama Canal. But is it really all they’re making it out to be?

The most recent drought conditions started with below-average rainfall in late 2022, and by January 2024 were being described as the worst drought in Canal history. The Panama Canal Authority (ACP) ranked 2023 as the second driest year since 1950. News articles reported cargo traffic was reduced by nearly 40% and that the world faced a $270 billion traffic jam in Panama.

Based on these dire reports, US government stakeholders asked our organization, the Global Water Security Center, to explore the situation, add some historical context, and figure out if things really are as bad as reports have been saying. Overall, our results didn’t exactly match what the media were reporting.

Why does the Panama Canal matter so much?

As the shortest shipping route to circumnavigate the world, the Canal facilitates the movement of nearly 5% of global trade. It uses a series of locks to lift ships up and over the continental divide and requires 52 million gallons of freshwater per ship; when these ships enter and exit the locks on each side of the isthmus of Panama, most of that freshwater is lost. The biggest constraint to canal operations has been the availability of fresh water in the reservoir.

No other feasible options exist to get water for shipping transits. The Panama Canal isn’t the only user of the reservoir; water drawn from the same reservoirs provides drinking water for 55% of Panama’s population. But drinking water accounts for less than 20% of total water use, far less than the fluctuations in water availability, so swapping drinking water for more transits isn’t the answer.

Saltwater can’t be used to supplement water for lockage; the Canal operates with gravity-fed water high above sea level, and even if saltwater could somehow get into the system, it would damage the freshwater ecosystem in the lake and the country’s main drinking water source.

As one of the world’s most water-rich countries, Panama typically has plenty of water for lockage and its other freshwater demands, but in dry years, officials must limit the number of ships passing the locks to maintain the minimum reservoir water level and conserve water for the reservoir’s other uses.

Is This Drought Unprecedented?

While the last few years have seen lower-than-average precipitation, the data do not indicate that Panama is experiencing unprecedented drought. Rainfall amounts in both 2023 and 2024 fall within the normal range of precipitation when compared to the rest of the historical record.

The figure below displays the total amount of rain that fell in each month from 1950-2024. Each line represents one year in the historical record, and the colored lines highlight rainfall for 2023 and 2024. While these two years fall on the lower end of the gray cloud of lines, they are certainly not outside of the cloud.

Thus, while Panama has been drier than average, it is wholly inaccurate to say that it’s been the driest drought the country has ever experienced, or that the current situation is wildly abnormal. 

This also isn’t the first time Canal water use has run up against limited water supply. The chart below shows a generalized water balance for the Panama Canal reservoir system—the quantity of water available from rainfall (minus potential evapotranspiration) in dark blue versus the water used for transits in orange and municipal water supply in red.

Rainfall naturally varies over time—sometimes it’s wet, sometimes it’s dry, and dry years are a regular occurrence. Typically, the canal has plenty of water to function without disruptions, but when it’s dry, it’s not abnormal for water demands to exceed supply (shown when the dark blue line touches or dips below the solid red total water use line). 

On this plot you can see that while the most recent year has been below average (the dark blue line is well below the light blue dotted line) there are plenty of other years with similar amounts of rain. While it’s true that the Panama Canal Authority has been dealing with dry weather since late 2022, it’s also true that dry weather like this has happened before in the historical record and will likely happen again.

A Bone to Pick About Communication of Drought in the Panama Canal

One way the media have demonstrated the drought’s severity is by reporting on how low Canal reservoir levels have gotten, like in the water level figure in this NYTimes story, suggesting reservoir levels are directly related to precipitation. While a low reservoir does indicate that the Canal Authority is under a lot of stress, it isn’t necessarily an indicator of how much rain has or has not fallen.

The Panama Canal reservoir system is intensively managed, with every drop allocated to one use or another. Our research found that while precipitation is the primary input of water coming into the reservoir, reservoir level is primarily driven by what goes out – i.e., how much is used for canal operations. In our analysis, precipitation was not correlated with reservoir level—more rain doesn’t equal a higher reservoir level because that water is put to use. Check out the supplemental materials in our Panama Brief for more details.

To what degree was trade impacted by this disruption to the Panama Canal?

What is true is that the Panama Canal drought slowed down cargo traffic, with canal detours that substantially increased shipping days and added significantly to shipping prices. However, in fiscal year 2023 the Panama Canal Authority moved their third highest tonnage in Canal history, with just 1.5% fewer goods moved than the highest tonnage year in 2022.

Despite the drought hype, tonnage moved through the Canal did not decline dramatically; instead, the Panama Canal Authority appears to have maximized the available water for cargo tonnage. Moreover, while the Canal serves as a crucial shortcut for global navigation, it is not indispensable for transporting goods from, for example, US to Asia, though bypassing it does increase time and costs. Conversely, other key routes like the Malacca Strait are vital to the global supply chain, and any disruptions there would significantly impact worldwide trade. For more details on global trade implications, see slide 3 of the Panama Brief.

Closing Thoughts

The Panama Canal Authority (ACP) works with very tight margins during an average year, using every drop of water that comes in to move ships through the Canal, so they feel the acute stress of drier weather immediately. Current drought conditions in Panama aren’t outside the range of reasonable possibilities based on the historical record, and the Panama Canal Authority must adapt to be flexible and nimble enough to handle it.  

If you are wondering how climate change is projected to alter precipitation trends in the Panama Canal, this is a tough question for a couple reasons. First, Panama’s complex geography, situated in the Intertropical Convergence Zone and positioned between two large bodies of water, generates atmospheric instability that complicates accurate weather forecasting let alone climate projections. Second, due to high levels of complexity, precipitation projections have much uncertainty.

These two factors limit the reliability of precipitation projections for the Panama Canal. Nonetheless, under the “middle of the road” warming scenario, climate models project a median 3% increase (88 mm/year) in precipitation by 2050 when compared to the reference period (1985-2014). This represents a very small change in precipitation attributable to climate change and suggests that rainfall patterns in the Canal will remain within the historical precipitation trends.

The headline here isn’t that Panama has experienced their worst drought ever or that climate change is behind the traffic jam at the Canal. Instead, it’s the much less sensational fact that humans have a hard time dealing with and planning for the natural variability of the water cycle.