Be careful what you joke about, because it may come true. More years ago than I care to admit, during a time of low commodity prices and timid drilling, I wrote a fantasy column that described the dilemma faced by western governors. Desperate for energy for their growing states, they had traveled to Canada for a hastily called energy summit, pleading for more emergency oil and gas supplies, at any price. I used this disaster scenario to point out that U.S. producers needed to drill all the wells that were possible, as fast as possible, and that the government should do whatever it takes to encourage more activity. Today, the disaster is real. It is playing out in California, where at fancy restaurants where consultants, energy suppliers and politicians dine by candlelight, the menus feature haute cuisine such as humble pie and crow. Among the chorus of consumer advocates, analyzers and blamers, the Cato Institute has sounded off. Analysts Jerry Taylor and Peter van Doren say deregulation is not to blame, but wholesale natural gas prices are. Because the state relies so much on gas during peak demand times, and because utilities are very limited in how much of their costs they can pass on to consumers, they are in a bind. "California would be facing the same combination of high electricity prices and blackouts even if the old regulatory rules were in place," they say. California's brand of "hands-off" deregulation prevented utilities from buying any gas on long-term contracts. Buying at spot only left them wide open to the peaks, as well as the valleys, of the volatile gas market. "The price of gas now swings by more in one day than it used to cost two years ago," marveled Robert J. Allison, chairman and chief executive of Anadarko Petroleum Corp., during a recent talk in Houston. (By the way, astounding Anadarko now has a market cap larger than that of Conoco or Phillips Petroleum.) Allison, a board member of numerous natural gas groups, had this to say about California: "They want a high-consumption lifestyle out there, but they seem to think their energy supply should fall out of the sky like fairy dust-environmentally friendly fairy dust. California generates less power per person than any other state, yet they won't let producers drill offshore and won't let utilities sign long-term gas contracts. And they are trying to shut down dams that make hydroelectric power." What's more, the state also forced the electricity companies to divest their power plants, leaving them even more vulnerable. Since 1996, electricity demand in California has risen 12%, but no new power plants have been built. If California could import enough power from other states, fine. But the 25% of demand that used to be filled by nearby Washington and Oregon is no longer available-growth in those states means they need to keep their power at home. These electricity supply problems may well spread elsewhere. Preliminary data from the third quarter of 2000 show that despite a huge surge in drilling for oil and gas, U.S. production remained about flat with the paltry levels seen in 1999-a year that saw a dramatic lack of drilling, not a surge. One can only hope that President Bush and the new energy secretary are paying attention to these frightful trends. In this respect, California's problems should be regarded as a fortuitous wakeup call. Since the gasoline lines in the 1970s, when have Congress and the public cared a whit about energy? Now, they do. The oft-repeated warnings of oil and gas producers have come true. However, I do think the oil and gas industry needs to tone down its expectations about Bush ramming through any meaningful energy policy initiatives. In the past when free-market or energy-related presidents occupied the Oval Office, little or nothing was achieved. Worse, Congress is now so evenly divided, it will be a miracle if anything of substance gets done-particularly in an area as emotionally combustible as energy. By the way, I'd like to again point out the new departments that we introduced in the magazine's January issue, and invite your feedback on them at lhaines@chemweek.com. First off, managing editor Nissa Darbonne's Completions is a new column that spotlights companies, trends and reports we find interesting. See it on page 9. Leasing and Permitting Data, page 69, spotlights the activity hotspots in Texas during the last three years. Which energy equities rose by the greatest amount in 2000? You'll see in Trends and Analysis on page 80. Cash Flows on page 83 documents the way institutions change their investing habits for small-cap E&P stocks when natural gas prices rise. Finally, senior financial editor Brian A. Toal's new column, Perspectives on Finance and Investing, is on page 98. This time out, he catches us up on the growth and financial success Canadian royalty trusts have achieved.