From his front door to the banks of the Cantareira reservoir, José Christiano da Silva used to stroll only a hundred metres when he first moved to the area in 2009. Today, amid the worst drought in São Paulo's history, he must now trek a kilometre across the dried-up bed before he reaches what's left of the most important water supply for South America's biggest city.

"It's frightening to look at," says the retiree, standing on cracked mud. "In the past, we'd already be under water here." After the driest six months since records began 84 years ago, the volume of the Cantareira system has fallen to 10.7% of its capacity, raising alarms for the nearby urban population of 20 million people and the most important economic hub on the continent.

The drought, affecting Brazil's southeast and central regions, has prompted rationing in 19 cities, undermined hydropower generation, pushed up greenhouse gas emissions and led to squabbles between states vying for dwindling water resources.

Supplies are usually abundant. Brazil has 12% of the world's freshwater and less than 3% of the world population. Apart from the arid northeastern Cerrado, its cities are normally more likely to be plagued with floods than droughts. With big rivers like the Amazon and Paraná, the country generally meets 80% of energy needs with hydropower.

But this year, the rain fronts that are normally carried south from the humid Amazon have largely failed to materialise and temperatures have been higher than usual, prompting the authorities to scrabble to tap new sources and reduce demand. "It has been a terrible year. The last rainy season was drier than the dry season," Mauro Arce, São Paulo's water resources secretary, told the Guardian. "This is a crisis and we are responding with technical measures and the support of consumers."

In São Paulo city, that has meant financial incentives to encourage residents and businesses to reduce consumption, the reduction of water pressure by 75% at night (which in effect means a cut for those – often the poor – living in high areas) and tapping alternative supplies. In neighbouring cities, like Gaurulhos, more draconian measures are in place with some neighbourhoods only able to get water one day in three.

Tensions have emerged between cities, and between those who want water for energy and those who need it for drinking, food and sanitation.

São Paulo has tussled with Rio de Janeiro over the use of the Rio Jaguari, a river that runs across state borders and is used by the latter for hydropower plants and to dilute sewage in the absence of adequate treatment plants. São Paulo, which is downstream, has tapped this river to partially recuperate the Paraiba reservoir system despite the protests of its neighbour and admonitions from the federal government.

"We're defending the inhabitants of São Paulo," said Arce. "Brazilian law is very clear. In situations like the one we face now, the priority is people and animals … People in Rio should have no concerns. They have a lot of water."

Local newspapers have referred to the dispute as a "water war", though it is more an argument about who will bear the costs of the drought. Water and electricity prices are expected to rise a month or two after the elections in October. Power utilities said last month that the loss of hydro-generating capacity had cost them 15.8bn reais (£4.3bn). Most of this was spent on more expensive oil and other carbon-based fuels that filled the gap in electricity supply. This in turn has pushed up Brazil's greenhouse gas emissions this year.

The outlook is as unpredictable as the weather. Government officials say that at current levels of depletion, the Cantareira system would empty in less than 100 days. The top two of the five reservoirs have been drawn down and now "dead water" – which is normally left untouched as a minimum level – is being pumped out of the third. City planners say they have an emergency plan to use still more dead water if the situation does not improve by November.

The first rains of spring this week have brought only partial relief. Despite a downpour on Tuesday night, the water levels of the Cantareira reservoir remained unchanged. In the current climate, even this was hailed as a victory.

"For the first time since April, the level didn't go down," said Arce, who says he is now having to draw up a fresh set of plans for the city because statistical predictions have to be adjusted in the light of the new reality of this super-drought.

Up next to the Cantareira too, the residents are also struggling to keep up with baselines and shorelines that keep moving further from the norm.

After the top reservoir shrunk into the distance, José Christiano da Silva moved his boat to the next lake down, but even there the water is now retreating as a result of emergency pumping that started 15 days ago. It is already about 20 metres from where it was and he expects it to diminish further.

"I've never seen anything like it," he said.