So yes oil markets collapse when folks can no longer afford to buy oil
Come on Pete, you sound like 2005.
The oil industry didn't collapse in '07 when depletion/low capacity forced the price above affordability
The reason?
markets
To review:
Oil is not homogenous but is fungible. It comes in a range of costs and qualities and is priced on the marginal (and most expensive to produce) barrel.
Consumers are more resilient than we thought back when, they can actually survive on less oil than they use when the price is $15/bbl. They are able to use marginally less oil without foregoing it entirely and "collapsing the market". They did it beginning in '07 or so in the US right up until the price fell below $80 or something this year.
So extrapolate that out to the end of oil...
depletion causes the market to increase price until folks can no longer afford (for example) $100/bbl for 100mbd. They will buy what they can afford and use it to greater effect. But just like the US from '07 - '14 they will not quit buying it altogether.
Lower demand reduces price and sends a signal to suppliers so they supply less, like '09 and now. There is lots of oil available at less than the cost of the marginal barrel so they shut in those more expensive marginal barrels and reduce supply to match demand.
After a few iterations supply might be 70mbd @ $70/bbl or something
Continuing depletion affects cost and eventually the market balances the price of that 70mbd at maybe $140/bbl.
The market again forces consumers to increase utility and reduce use. Again there is no need to reduce to nothing, just to what they can afford. They adjust their uses and achieve greater utility.
supply declines as demand adjusts, but eventually depletion causes the market to increase price again, so again demand falls, again supply declines...
repeat until the cost of oil power increases to exceed muscle power (or whatever comes along next) and even then there will probably still be an oil market for uses other than power.
Notice that at no point did the oil market collapse.
Definitely not as sexy as "
oil market collapses in overnight armageddon" but since there is no reason for "collapse" except wishful thinking I'm thinking no collapse is more likely.