Oil companies are experiencing extremes: record highs in profit and lows in reserve replacement. The most egregious example is Shell. Yesterday it posted record annual earnings for a European company, but yet again cut its overall reserve figure and admitted that last year it could book only enough new proved reserves to cover between 15 per cent and 25 per cent of that year's production.

If such a ratio of stocks to output continued, Shell would obviously soon run dry. The company will probably be able to make up some reserve ground quite legitimately, simply by re-booking as marketable over time some of the reserves it has just had to downgrade in acknowledgement that it has flouted industry reserve accounting rules. But it is clear Shell will struggle to get reserve replacement back to 100 per cent, a level that its better managed peers are only barely achieving.