It's all over but the shouting. There will be no drilling in ANWR, U.S. production declines will keep worsening and true wildcatting will become as rare as an endangered species. Gas demand rises 2% annually while domestic production remains flat. The reliability and longevity of crucial oil supplies are increasingly fragile, prices for commodities are rising and the cost at the pump is way up. Yet Americans still don't get it-they will not create an energy policy that encourages domestic drilling in addition to conservation and alternative-fuels research. If Congress could not bring forth a realistic, balanced policy in this year of all years, in the shadow of 9/11 and Middle East violence, it may never do so. Yesterday, a frustrated Colin Powell departed Israel empty-handed. About 24 hours later, the U.S. Senate voted down the possibility of drilling in just a small portion of the Arctic National Wildlife Refuge. Neither did it demand that Detroit improve automobile fuel efficiency in order to reduce gasoline usage. Meanwhile, total U.S. crude production has declined steadily for 30 years after peaking in 1971. Nothing has changed that trend-not 3-D seismic technology, horizontal drilling, high-tech fracture stimulations, nor deepwater exploration. Billions of dollars have been spent (wasted, some might argue) only to keep production from declining even faster than it has. Does anyone see the raw connection among these aforementioned facts? It may be naive to assume the Middle East will always bail us out. It is too easy to assume that no matter what happens in the OPEC countries politically, they will keep pumping oil for us because they need the money. Some 40% of Saudi Arabia's population is under the age of 14 and the country has one of the fastest-growing populations in the Middle East. Iran and Iraq have similar growth. When in 10 years those young people demand jobs and there are not enough, what unrest then? Closer to home, look south. Some 80% of Venezuelans live in poverty, despite that their nation is the fourth-largest exporter of crude oil in the world. While the people aspire to a better standard of living, Venezuela's oil production is declining, thus threatening to reduce the very income upon which they depend. Repeated unrest there is likely. What do these factors portend for oil exports to U.S. shores? At the Executive Oil Conference in Midland last month, Jim Lightner, president and chief executive of Tom Brown Inc., pointed out some telling statistics from the Energy Information Administration. He wondered aloud if people fathom the degree to which wildcat drilling in the U.S. has disappeared, and what that implies as far as security and the cost of future oil and gas supply. Recall that in 1981 at the height of the oil boom, operators drilled 17,500 wildcats in the U.S. Then in the depths of the drilling depression in 1986, they sunk only 7,156. We all thought things could not get any worse-but they did. Throughout the 1990s, the wildcat count remained below 5,000. And in 2000, only 2,076 wildcats were drilled-less than a third of the amount drilled during what we regard as the industry's nadir. "What has happened to our industry? Where have all the prospects gone?" asked Lightner. "Over the last 10 years, most of the gas supply and drilling activity has been from exploitation, not exploration. The problem is, this is a finite game." Overheard at a recent oil and gas strategy conference: "Change is happening so quickly that big companies can no longer be slow and stupid-they will have to pick one." My theory is, if they are slow, they are probably stupid. One way to be smart is to maintain consistency and clarity of earnings, which was one of the main themes at the 30th annual Howard Weil oil-investment conference last month. "If you can't kick it, you can't count it," said Bob Palmer, chairman and CEO of Rowan Cos. "We want simple financials because life is too short, too complicated already to do otherwise," said Jim Mulva, Phillips Petroleum CEO. Financial discipline was also frequently mentioned, but while this is in response to the Enron debacle, many E&P executives privately said it was also an indication of the scarcity of high-quality drilling prospects. "It is not high service costs, but quality of drilling prospects that worries producers most, and that can cause further consolidation," noted Howard Weil chief Bill Walker. "Our mantra has always been, 'management, acreage and balance sheet.'" "Producers are more conscious of maximizing our present value, but that comes at the cost of increasing the average well decline rate to 50% vs. 35% just a few years ago," said Anadarko Petroleum president John Seitz. No wonder noted macro oil analyst Henry Groppe said at the Midland conference that he thinks oil will hit $35 a barrel, and soon.