Once the issue with Iran resolves itself, will oil prices crash? Many are saying “yes.” I think they are wrong. Certainly oil prices are higher than they normally might be because of the ongoing conflict with Iran. And if war breaks out, oil prices will spike even higher. On the other hand, I have to completely disagree with the position that oil prices will crash. According to the International Energy Agency (IEA), the world supply of oil is just under 90 million barrels per day…about the same level as daily world consumption. While some point to the fact that oil inventories in the U.S. are high (which is one of the factors why some point to a crash in oil prices), they are forgetting to note that oil inventories in other parts of the world are falling. Most experts in the oil industry, including the IEA, agree that the oil wells supplying the world with oil are declining at a rate of three percent to five percent per year. That means that if there is no economic growth in the world, we still need to find roughly 3.6 million barrels a day more of oil to replace the wells that are running dry. If worldwide economic growth is 1.5%, this is another 1.35 million barrels per day needed to meet demand, bringing the total supply required to roughly five million barrels a day. To put this into perspective, Saudi Arabia exports about six million to six and a half million barrels per day. Five million barrels a day is a significant amount of oil that needs to be replaced. In a recent interview, the CEO of Royal Dutch Shell plc (NYSE/RDS-B) stated that the era of cheap oil is over, which will mean sustained higher oil prices (source: Forbes , Apr. 23, 2012). As oil wells deplete, we need to drill 6,000-7,000 feet below the ocean’s floor to find replacement oil or we have to visit our friends north of the border to extract oil from the oil sands—both expensive propositions. An oil stock can only make money for investors if oil prices are above the price of extracting that oil from the ocean or the oil sands or another expensive source. Shell estimates that worldwide demand will double by 2050, with most of the new demand coming from emerging economies. It is estimated that China could overtake the U.S. to become the largest consumer of oil over the next few years even if China’s economy is slowing! Although a number is hard to come up with, most experts place the higher cost of extracting oil from the ocean floor or the oil sands at approximately …