High natural gas prices are a Damocles sword hanging over the U.S. economy-and every gas producer. People are studying exactly how much demand is going away. Some industrial users will switch to other fuels, close entirely or move operations abroad. John Gerdes of Southwest Securities estimates U.S. production will decline 3% this year or 1.4 billion cubic feet a day, but industrial demand is going down 10% or 1.5 Bcf a day. Meanwhile, imports from Canada are down slightly. During a Houston briefing recently, Charif Souki said demand destruction is a euphemism for lost energy, fertilizer and aluminum jobs, and company bankruptcies. For his part, the chief executive of Cheniere Energy is moving this E&P company down a new path to build three liquefied natural gas (LNG) receiving terminals along the Texas coast-even to the point that it changed its ticker symbol to LNG. And he did this well before Federal Reserve Chairman Alan Greenspan touted LNG in remarks to the House Energy and Commerce Committee in early June. Within days of each other, Business Week, The Los Angeles Times, BP economist Peter Davies at a London press conference, and Greenspan each warned about the U.S. gas crisis. Fitch Ratings said the way public power companies handle their exposure to natural gas supply and price volatility will affect their credit ratings. Energy Secretary Spencer Abraham told senators we have limited ability to correct this problem within the next 18 months, and convened a summit in Washington. Turns out $6 gas is a big wake-up call. Let's hope it prompts some solutions without opening Pandora's regulatory box. It has already caused the U.S. gas-drilling rig count to nearly double from this time last year, and for injection into storage to hit 125 billion cubic feet the week of June 6, setting a one-week record. Still, inventory is about 30% lower than the six-year average for this time of year. This situation, predicted for months by industry and analysts, comes as a surprise to a lay audience such as Congress. Even to those who are aware, the situation is now more urgent than they had supposed. Ask California Governor Gray Davis, who is the subject of a recall campaign because of the state's bankrupt budget, caused partly by the way he botched the state's energy supply crisis in 2001. America, wake up! Many of the underlying premises upon which rest the alleged Evil and Corrupt Bush-Cheney-Insiders Energy Plan promoted in 2001 turn out to be true. Imagine that. Energy trend-watchers such as Matthew Simmons at Simmons & Co. International, Marshall Adkins of Raymond James and a host of other analysts, whose constant warnings on depletion turn out to be true, can say "We told you so." There is scary talk of forbidding utilities to burn gas and to revert to coal. It is tempting for Congress to take the easy road, to pander to woefully uninformed consumers who automatically oppose development of oil and gas resources. But politicians are paid by us to lead. At the state and federal level, they should be asking what the energy needs are for the economies of each state. What do voters need in the way of air conditioning, lights and hot water? Two, three, five years from now, how are they going to access enough energy, and at what price? What real options do they have? What about Canadian gas supplies? Experts think this year operators will drill a record number of wells in Canada, or close to it. Calgary-based FirstEnergy Capital Corp. foresees a 21% increase in gas-well completions, to 11,685, possibly surpassing the record set in 2001, but certainly more than in 2002. At press time, Alberta Premier Ralph Klein was speaking at the Edison Electric Institute in Washington, offering Alberta's help in meeting American energy needs. But a few days earlier, FirstEnergy issued a report with a blunt warning: "We believe that almost no amount of [Canadian] drilling can now be achieved to overcome steady gas production declines in the next few years." Meanwhile, weather forecasters say this summer will be warmer than usual in the southern U.S. The sky isn't falling. It fell. And until additional LNG sources arrive in four or five years, the gas markets are gonna be hell. Two reminders: What could be nicer than an informative-and free-event in Denver in August? Don't hesitate then, to sign up for the 8th annual oil and gas investment conference we co-sponsor with EnerCom Inc., to be held there August 4-7. Just go to TheOilandGasConference.com for the agenda of about 50 presenting E&P and service companies, and to register. And if a merger or acquisition of producing assets fits your autumn plans, we invite you to attend our A&D Strategies and Opportunities conference in Dallas, September 9. To register, go to OilandGasInvestor.com. See you there!