At year-end 2006, a number of knowledgeable people gave us their recipe for continued high oil and gas prices. But how painful are high oil prices?

Apparently they have not caused enough pain to diminish energy demand to any large degree-at least not yet. Yes, sales of SUVs and trucks have flattened out, but Toyota's auto sales are going up steadily. We are not driving fewer miles overall, just changing vehicles. Through November 2006, gasoline use in the U.S. was up 1% over 2005.

Our GDP is still growing despite paying billions for imported oil. Last year, the Dow Jones Industrial Average reached a five-year high even though oil and gas prices have been at or near levels we once believed would hurt the economy.

The new Congress may try to inflict more pain in an effort to reduce oil demand. Talk of carbon taxes in Europe sounds appealing to Democratic ears here. Congress will shift from boosting traditional energy supply with incentives and tax breaks, to encouraging more alternative energy sources The buzz about alternative fuels is getting much louder. At press time, corn was trading at an 11-year high over the hype and hope surrounding ethanol.

Also at press time, a group of retired military officers and chief executives called the Energy Security Leadership Council issued a report, calling for tougher fuel standards and more access to offshore oil and gas resources.

Congress has obliged-somewhat-on the latter, as senior financial editor Brian A. Toal says in his column, "On the Money," in this issue.

But underlying all the debate about energy, the need for oil grows unabated-only the rate of growth fluctuates. OPEC recently predicted daily world demand will grow by 1.3 million barrels in 2007. The U.S. Department of Energy projects growth of close to 1.7 million a day. The International Energy Agency projects that daily demand will rise by 1.45 million barrels or 1.7%.

What does Claude Mandil, executive director of the IEA, think? In Houston last month, speaking at Deloitte's annual oil and gas conference, he came with a warning, and he chided the U.S. for not doing more about it.

If no new energy policies are put in place in this or any other country, world energy demand will rise by 1.6% annually, or a net 50% by 2030, he said. To find enough barrels, the world needs to invest some $20 trillion between now and 2030, or $3 trillion more than the IEA originally thought, because unit costs are rising.

Mandil doubts worldwide investments in oil and gas supply, infrastructure and refining capacity will be enough to meet demand.

"Energy consumers will sadly become more dependent on supplies from a shrinking number of higher-risk producers, which is a recipe for higher prices. And, we see a 55% increase in CO2 emissions from 2004 to 2030, which is totally inconsistent with energy-supply security and environmental protection.

"This is absolutely not sustainable."

Oil will remain the largest single energy source worldwide to 2030, with coal second, he said. "Interestingly, in our previous scenarios, we thought natural gas would be second. Now we don't."

The entire energy challenge is "too high," in Mandil's words. He urged the world to speed up investment in traditional energy and infrastructure, do more on creating alternative supplies, and finally, do more to lower energy consumption.

"In the longer term, on current trends, we are on course for an unstable, dirty and expensive future."

These are somber words that require a great deal of thought. But Mandil said the IEA is committed to letting market forces work. At the same time, it recognizes that "sometimes market signals are not strong enough...and sometimes you need government control, or at least leveling, by regulation. We need to be sustainable, but not at the expense of our economies."

At the IPAA annual meeting this fall, we learned that Americans want alternatives to crude oil-but ironically, they think oil and gas companies will be the most logical ones to develop those alternatives. After all, they have the R&D clout, and more important, the production and distribution networks that can be adapted. Speakers at the Deloitte conference reinforced this view.

In the new Congress, achieving the right balance between energy supply, demand, the economy and the environment will be a leading topic, after the Iraqi war. We urge the government to keep the status quo for now and let the oil and gas industry do what it does best-drill for oil and gas. Don't roll back the incentives outlined in the Energy Policy Act of 2005. Instead, give them time to work.

This year, members of the House will be required to work a five-day week. It's about time. But we run the risk they will actually get more done, with a big chance they muddle the energy picture further instead of helping it.

That's a risk we cannot afford to take.