Last year was one of the most dramatic ever in the oil and gas industry. The repercussions of it will color 2006, which is going to be one of the busiest in the history of the industry. E&P companies plan to increase their global E&P spending some 14.1%, according to Citigroup's annual spending survey. In the U.S. alone, company budgets will go up 16.5% from the 2005 estimate to total $56.4 billion in 2006. The figure is nearly double that of $33 billion in 2003. And, actual E&P spending could surpass formal budgets for the sixth year in a row, says Geoff Kieburtz, managing director of oilfield-services research for Citigroup. Even so, companies may not spend 100% of their abundant cash flow. It's quite a reversal from the 1980s and 1990s, when producers routinely outspent cash flow. Today they are not living on borrowed money; they are living on borrowed time, if you believe in the warnings emanating from depletion trends. The Energy Information Administration startled the market in December when it hiked its long-range, oil-price forecast for 2025 to $54 a barrel-a full $21 higher than its prior estimates. Seems reality is setting in. In the thriller movie Syriana, a character says that the U.S. must mount the equivalent of a moon shot or Marshall Plan to reduce dependence on foreign oil-or stop using oil altogether. That sentiment echoes what oil-policy analysts and politicians have been saying during the past year or two as energy prices have doubled. Otherwise the country is held hostage to growing geopolitical risks, not least of which are the whims of tyrants or feisty national oil companies flush with newfound confidence. The majors are "returning" to North America by bumping up their drilling budgets, if not their acquisitions. This is prompted by new respect for unconventional, repeatable, low-risk resource plays they hope will boost gas reserves, and by the geopolitical risks and cost over-runs they face abroad. For more on this, see the January issue of Oil and Gas Investor. For a subscription, call 713-993-9325, ext. 129.