Lemme start with the most obvious:

Those dictators in the Middle East which have propped up their regimes based upon oil prices would be doomed.  Not necessarily immediately, though.  In the cases of Saudi Arabia, Kuwait, and others, the nations built up reserves called oil stabilization funds... giant backup currency reserves in case the price of oil falls.

This isn't the universal case... before the Iranian election, it was well known that the Iranian government pretty much squandered its OSF before the '08 recession started, putting it in a financial crisis after the fact.  Venezuela is also a culprit here.

But anyway... depending on the size of these funds, the countries in question will have a short timeframe... and I mean short... to begin economic reforms.  This would involve establishing some kind of non-oil industry.

The big problem here is that many of these nations will require a big weaning off from taxes.  Many of these people, such as in Iran, are used to paying absolutely no taxes, and having significant social services paid, largely by oil money.  Iran has probably one of the most extensive social service programs in the world, and it can afford them, due to the oil.

Once oil is no longer an issue... these countries are forced to undergo financial reforms unlike anything we've seen in the Western world.  In many cases, taxes would become a largely new thing (in the Iranian example, the government actually tried to institute a very small business tax, but the banking industry lodged a huge protest).

In the US, the nation underwent a revolution against Britain over an extremely small tax meant to pay for its military.  In many of these countries, its people are going to have to sacrifice free education, free health care, and pay taxes.  I would expect social upheaval... easily.

Zarf, but what would happen at the international level?  That is, how would these nation states deal with the resulting social upheaval, and, moreover, how would that affect the West, China, etc..

If suddenly the Middle East were to become less of an economic power center, I don't think anyone can really even venture a guess as to how it would affect international geo-politics.  There are too many variables to consider in this regard:

1.  to what extent and how quickly would said oil-export reliant economies be able to adjust to their new economic paradigms
2.  to what extent and for how long would said oil-export reliant economies experience dysfunctional conflict either domestic or regional
3.  to what extent would they find productive uses of their remaining supplies of oil resources (either for domestic production or international export)
4.  to what extent said countries could maintain good diplomatic and trade relations without their previous clout based on their oil reserves.
5...?

Care to help me brainstorm more, Zarf?

look up the history of Nauru when their natural resources depleted. Thats what will happen to the oil dependent countries.

the entire world economy is based in some way on oil. or more precisely the cheapness and convenience of the energy provided by oil. so far no other form of technology has shown that it can compete in terms of cost and convenience with oil.

all other forms are either more expensive and less convenient. burning oil and its derivatives is not efficient and is very pollutant. extraction isn't that easy either. but when you way it up oil is cheap and you can use it to power planes, cars, ships, trucks, trains and generators. what else can do the same at a comparable cost? nothing. that's what.

people talk about hydrogen as a potential replacement but it's waay harder to extract than oil and harder to store. result = WAAAAAAAAY more expensive and less convenient. and economies dont like that.

the only time things will change is when oil starts to become so rare that a barrel is like $500 or whatever. when it becomes so expensive to buy that other alternatives start becoming viable.

It seems people need some exposition as to why a swift depreciation in the price of oil is a possibility.

In another thread, there was discussion on China's cornering the market of rare earth reserves.  Why are they doing this, I wonder?  It has been proposed it is to move their manufacturers up the supply chain so as to produce and distribute more finished products. 

But another potential reason for their interest in rare earths is that they could be positioning themselves for a coming paradigm shift away from a fossil fuel reliant economy to one based on alternative energy sources.  In particular, an economic distribution system based on electric rather than combustion engines, one which would rely on a new and improved ultra-efficient rechargeable "battery" technology, the production of which would require rare earths.

Electric engine utility trucks for inner-city and electric powered freight trains for inter-city transportation of goods will become the norm in such an economy, and a swift depreciation in the price of oil would result, in my opinion.

(Already today in major Chinese cities, there is a shift away from the use of combustion engines for, I would estimate, as much as 10% of inner-city distribution, mostly by electric bicycle / utility trucks).

without reading all the newer posts here, ill say why i beleive that this will never happen, there is obviously only a limited ammount of oil left, now everyone automatically thinks gas when you here oil, but the fact is a large part of it is made into plastics, and we are heavily dependant on plastics, now there would be the gas part left over, but there are still more developing countries that are decades behinds the industrial revolution, and just as china did, they will buy up our outdated tranportation and machines of all sorts that still run on oils. this will continue until a new power source becomes cheap, easy to obtain, and common knowledge to create. in otherwords we will definately run out of the stuff way before we outdate its uses. and with limited supply and sustained demand will come price hikes.

this guy has got it spot on^^^

as countries develop economically they demand more oil.

All I'm saying is there's a chance oil will become obsolete to other sources of energy. New technologies could make alternative sources simply less expensive.  Plastics, too, could become obsolete.  I'm arguing that there is a good chance this will happen, because the trend is to develop environmentally sustainable systems of production in all industries. 

The question is, what are the odds this will happen?

but where will the energy for your battery come from?

The technology to replace oil energy already exists. However they are either extremely expensive or unreliabe (or both). Should individual, corporations and nations be willling to accept short term  higher costs for long term gains then at some distant point the tide oil wil turn.

Silliness.

1.  The only reason there is a market for electric cars is that the government subsidizes them.
2.  Even when buying a car with the tax incentives mentioned above, over the life time of the vehcile you will most likely never recoup the additional cost of the electric vehicle over a similar sized gas/diesel car.
3.  Europe has gas prices twice that of the U.S.  people thier don't buy electric cars, they buy diesel.
4.  Think of how much money the government makes off of taxing fuel, you think they are going to let that golden egg go to rot?
5.  In the U.S most power plants are coal powered.  Even electric cars need something to charge them, if your not running of gas you will essentially be running off coal.  Any idea how much electricity prices while fly through the roof?

Mace hits on something when he said:"The technology to replace oil energy already exists. ... Should individual, corporations and nations be willling to accept short term  higher costs for long term gains then at some distant point the tide oil wil turn.

I think this would be far to costly, "oil" right now isn't fighting back.  A few years back ethanol was supposed to be the big savoir from gas prices here in the United States.  Even with gas prices over $4.50 here and with the government heavily subsidizing it - ethanol couldn't compete with gas and to make matters worse - 1,000's of arces of farm land was basically harvested and turned into this crap, thus driving up the prices of food.  People are grasping at a way to compete with $4.00 gasoline and losing millions if not billions of dollars doing it - all electric cars have been a sales disaster.  Here in the states 40% of all electric or hybrid vehicles sold were bought by the government - not by the public.  If there were a car fairy and he magically made a vehicle that was more practic to buy then $4.00 gas then all it would take is for OPEC to drop the price per barrle down so gas went to $3.50 and that vehicle too would be a sales disaster