Still clueless on energy.

THE Cassandras of the oil world are back to warn us energy-consumptive mortals that the days of cheap crude are over--and that with production perhaps peaking out, it's only a matter of time before supply is exhausted entirely.

With consumption of oil having risen 45 percent over the past 30 years, it's both a scary and compelling case. We already know that short-term shocks usually lead to recession--as happened after the Arab oil embargo (1973-75), then after the second embargo 0981-82) and most recently after the Gulf War (1990-91).

All three spikes came in the midst of lackluster growth, which of course is what we're now seeing. Given the recent spurt in oil prices, Morgan Stanley economist Stephen Roach told The New York Times: "My guess is that some lasting damage has been done at these price points and we're likely to have a significant haircut on growth next year."

The problem is compounded because we live in a world of short-term memory and any pickup that follows an oil-related recession creates so much excitement that no one remembers what got us into trouble in the first place. Next stop: the SUV dealer.

As oil prices slid back into the mid-$40s last week after nearing the $50 a barrel mark, you could sense a feeling of relief in the markets, even if the overall dilemma of too much demand and not enough supply remain firmly in place. And guess what--SUV sales are up 6.5 percent lot the first seven months of the year.

The fundamental problem is that it's just too easy to assume oil will always be there--that all it takes is some OPEC minister to say the word and suddenly there are instant gushers and lower prices. The government of Saudi Arabia pronounced the other day that it could produce 1.3 million barrels a day over the current daily output of 9.3 million barrels.

What the Cassandras keep insisting--whenever they get the floor--is that we're not developing an energy policy that treats oil as the finite resource it is. Energy companies are reluctant to invest in new exploration because of concerns that production gluts will eat into their earnings (a not unreasonable prospect). Alternative energy efforts, though having an impact in certain niches, have yet to make it into the big leagues because they're either more expensive than oil or simply impractical to implement on any major scale.

Not that we' re anywhere near the world of 1973. Conservation measures have been a largely unheralded story. One estimate has the federal government saving 35 percent on energy costs over the past 30 years thanks to efficiency efforts. And Washington's Energy Star program, designed to reduce greenhouse emissions, has saved businesses and consumers more than $9 billion in the past decade.

But while these are nice stories, domestic demand still rose 3.5 percent in the second quarter compared with the like period last year. Asia alone will account for half the 2.5 million-barrel jump in daily oil consumption (with China accounting for one-third). There is no way to get around those stark numbers--nor the immensely complicated web of agendas, many of them conflicting, that make up the oil business.

Yet on one point the Cassandras cannot be denied. Sooner or later, there will be no more oil to tap, and while that terrible day might be decades into the future, it could take at least that long to figure out how best to replace our number one energy source. Judging by the headlines, we still haven't a clue.

Mark Lacter is editor of the Business Journal