Conventional oil production peaked in 2005. Gains since then have been from tar sands, biofuels and the like.
The issue is simply that it takes energy to produce energy. For example, when you first tap a new reservoir, the pressure from the weight of the rock above it will squeeze the oil out. As the oil depletes, this pressure is no longer enough, so you pump in something like water, this water costs energy to pump into the ground, and as the reservoir depletes further, the water is under greater pressure from its own weight, so more energy is needed to pump it in there. And the oil that comes up is mixed with water, and you need a system to separate them, and so on.
Obviously decades ago we discovered a bunch of oilfields, some were easy to access, some hard, guess which ones we tapped first. This is why you now get more deep sea oil rigs, drilling down through a mile of water, half a mile of rock, another half a mile of salt, before they get to the oil. Guess what, all that costs energy too.
As well, in the process of burning energy to get energy you also produce more pollution. Do a google image search for "tar sands" and you'll see what I mean, it's a messy process.
What you get is that in 1950 you'd have 1 barrel of oil equivalent burned to extract 100, nowadays it's more like 1 to 20-30 in places like Saudi Arabia, and 1 to 4-6 in the newer deposits. So whatever the dollar cost we're willing to pay, it's the same as everything else in life, diminishing returns, it becomes not worth the trouble.
It's true that improving technology means we can always get new oil. In principle we could mine Titan, the moon of Saturn that has hydrocarbon seas. But it's not really worth the trouble.
The dollar cost is significant too. If you earn $100 a day and the fuel to drive you to work costs you $100, well then you probably stay at home. Short of that unlikely scenario, life starts becoming difficult when transport becomes expensive. Because it's not just your commute, but transport of good around the world. Those $5 Chinese t-shirts would be a bit pricier without cheap oil to transport them across the oceans for you.
In practice oil prices are never likely to rise so high they destroy a Western economy. What happens as the price rises is that sources people couldn't be bothered with suddenly look good, everyone rushes out and develops them, they all come online 5-10 years later, people cut their consumption by driving less and putting in alternative energy, the price drops precipitously, those borderline oil fields become uneconomic, they get mothballed and fire all their workers, production drops, the alternatives become more expensive, people start driving more, and the price rises again.
As well, high oil prices flow on to high coal and gas prices, and money spent on things we burn is less money spent on expanding factories, renovating homes, educating children, healthcare and so on. A strong economy can withstand high energy prices, a weak economy or one in recession will be hit hard by them. Thus high prices lead to "demand destruction", which is economist-speak for "everyone gets fucked up." You know when you lose your job and you're broke? Your demand for goods and services has been destroyed.
When resources are near their limit, it all becomes more volatile and unpredictable. Oil will never run out, but it will become more and more uneconomical to simply burn it. And oil is so useful in making plastics and various chemicals, it's just wasteful to burn it. In future years people will look on us burning it as a carpenter would look at you burning some fine walnut wood.