Not so many years ago, when the world was flush with spare capacity, Shell's annual capital spending would rarely top $10bn. For this year, it will be almost double that number.Throughout the industry, oil companies are ramping up investment in exploration and development. The oil isn't yet running out, but it is becoming ever more expensive to extract. The political complications of the Middle East make the remaining sources of cheap supply look uncertain too.Jeroen van der Veer, Shell's chief executive, reacts with almost visible anger to any suggestion that he and others in the industry are deliberately underinvesting so as to keep the oil price high.

The days of easy oil - accessible reserves capable of being developed at marginal cost - are over.To satisfy the world's demand for fossil fuels, the oil majors must drill in ever more inaccessible and inhospitable places. Why should the fruits of this tax go to the City? I don't want to act as an apologist for Big Oil, but scratch the surface of the $25bn of annual profits announced yesterday by Shell, and you can begin to see the answer.The profits were at a record, but oil production was sharply lower and the reserve replacement ratio - the rate at which the company matches the oil it sells with new finds - is down to a miserable 60-70 per cent. We are in the midst of another round of record profits from the oil majors, which for those who still think of profit as a dirty word, means it's oil bashing time again. The UK government has already had two bites at the "windfall" profits of the oil majors, the last one in the pre-Budget report two months ago, but the TUC wants one-third, with the money to go to the pensions compensation scheme or some such other worthy cause.It's a natural enough response, since a rising oil price feels to most of us like a tax, eating away at our disposable income.

To stand idly by and watch it renationalised by the Russians really would be a pretty pass.Shell: not enough profit, too little investmentFirst Exxon, now Shell, next week BP. It took huge amounts of political capital to free Centrica, once part of British Gas, from the dead but at least largely benign hand of the British state. In a diplomatic crisis, what is there to stop Gazprom turning off the taps entirely? Britain has prospered by keeping its borders open to inward investment, but there are genuine issues of national security involved here.Back in the 1980s, the Kuwait Investment Office was ordered to slash its stake in BP on the grounds that this was a sovereign state attempting to take control of a strategically important company The same standard should be applied with Centrica. Gazprom lays claim to about 60 per cent of Russia's gas reserves and is responsible for about a fifth of the world's supply of gas.

Despite its inefficencies it is also one of the cheapest sources of gas around.Yet to see how potentially dangerous it might be for Britain so wholeheartedly to embrace the Russian bear, just look what happened to Ukraine, where for largely political reasons the Russian government overnight trippled the price. In the short term, this might have some positive impact on the price. The underlying strategy is to seek security of supply in diversity.With Gazprom as owner, Centrica would presumably quite quickly become only a conduit for Russian supply. In order to protect itself from high levels of volatility in the gas price, it has also been acquiring its own sources of supply, both in the North Sea and the west coast of Africa. As things stand, Centrica derives its gas from a variety of different sources and contracts.