The Independent Petroleum Association of America claims IPAA members sent 2,800 e-mails to U.S. representatives in October and November urging that the energy bill in conference between the House and Senate be passed. Were any of those messages taken into account? A bill that's anything close to sensible could be an early Christmas present for many operators, kind of like getting a new sweater and socks instead of a bike-good but not exactly what they wanted. At press time, the conference committee between Senate and House Republicans had just agreed on the language, dropped the idea of drilling in ANWR (the Arctic National Wildlife Refuge), and sent a revised bill to the House and Senate for action. Senators vowed to filibuster. The fact that Democratic members of Congress had little or no input in the conference deliberations was a sure invitation to havoc. We need a balanced bill, one that encourages companies to try to increase U.S. oil and gas production but also encourages energy conservation and higher automotive fuel standards. We need to fund research into alternative fuels and new technologies that make finding and producing oil and gas more economic and efficient. We must protect the environment, of course, yet preserve jobs in the energy industry. The draft bill offers help for some. It allows for royalty relief for producers in the Gulf of Mexico deep Shelf, ultradeep Shelf and deep water. It calls for streamlining the permitting process on federal lands in the Rockies. The departments of agriculture and interior, the Environmental Protection Agency, and the chief engineer of the Army Corp of Engineers are to start a pilot program to improve the process. They will assign staff to the various field offices to see what can be done. What else might be under the Christmas tree? Price forecasts come wrapped in many colors. Prudential Securities thinks oil will average $24 per barrel, down $6 from the average in 2003. A.G. Edwards' forecast is $25, with a floor in the mid- to upper-$20 range. ESAI estimates $27 or $28. Raymond James & Associates predicts $28. A lot depends on demand. Despite a weak economy and "demand killing" oil prices that averaged $30 per barrel in 2003, global demand will have increased by about 1.1 million barrels per day in 2003, estimates FirstEnergy Capital Corp. of Calgary. The International Energy Agency in Paris predicts world oil demand will grow 1.3 million barrels per day in 2003. Driven by consumption in China, India and other Asian nations, demand will rise 1.4% in 2004, it says. In addition to the strength of worldwide demand, Iraqi oil production will be one of the price wildcards in 2004. Output was estimated to be as high as 1.6- to 1.8 million barrels a day at press time, versus pre-war output of 2.5 million. The call on OPEC oil in 2004 will be about 23 million barrels per day, the lowest demand since 1991. Meanwhile, non-OPEC oil production keeps rising-and gaining market share-fueled by increased output from Russia and Africa. These production increases are needed. Sources estimate that up to 40 million barrels per day of new crude oil supplies will be needed by 2010 to offset worldwide field declines and fulfill growing demand. In the U.S. and Canada, the question is always about natural gas. No one disputes that U.S. production is falling; the only question is by how much. Despite a 2003 rig count that was about 28% higher than in 2002, final data will show that U.S. gas production has fallen 2% to 3% in 2003, sources say. Of 42 publicly traded producers tracked by JP Morgan Securities, only 31% were able to grow their gas production organically (without acquisitions) through the third quarter. Most of the majors showed declines in North America. Production from the top five major integrated firms fell 9.7% year-over-year for the third quarter, notes Southwest Securities. The record is not pretty. In the Lower 48 alone, BP's gas production fell 8%, ChevronTexaco's and ExxonMobil's both fell 11%, and Shell's gas output was down 12%. What about the big independents? Devon and Anadarko each reported production up 3%, Dominion E&P was flat, and El Paso's was down 26%. Burlington was down 6%. Although there was a record level of gas drilling in Canada in 2003, marketable Maple Leaf supply still fell by about 2.5% or 500 million cubic feet per day-with no improvement anticipated in 2004 or 2005, says FirstEnergy. What is likely in 2004 for price forecasts? They range from Morgan Keegan predicting under $4 per million Btu for most of 2004, to Lehman Brothers thinking the gas price will average $3.75. Raymond James says it will vary through the year but remain between $4.50 and $6.50. Whatever the economics and policies turn out to be in 2004, all you can do is keep turning to the right, applying capital wisely and ginning up the next prospects. Good luck and happy New Year.