> It usually results in a spiral that is negatively self reinforcing
In the case of oil, suppliers would stop pumping when it was no longer economically viable to do so, contracting supply and thus raising the price until it reached equilibrium. The same should be true of other goods. Why do you think that decreasing prices tends to create a downward spiral?
The price signal cannot function if it can only move in one direction.
I think you're both right. Prices going low means less incentive to pump, which leads to decreased supply and prices stabilize.
Also prices going low means companies fold, people get laid off, the economy gets weaker, so demand goes down some more.
These things are going to feedback until equilibrium is reached.
A related factor is what part of the ratchet we are in. In the 1800s the ratchet was "ever upward" and if economic factors shutdown some pumps there were plenty of incentives to keep that shutdown temporary and through more capital investment at it to bring back when market forces shifted again. In the 2000s we may truly be in the "downward spiral" ratchet where enough pumping shuts down, those shutdowns are permanent. There's far more competition from increasingly cheap solar and wind and other renewable energy sources than there ever was.
Eventually permanently decreased supply can also drive prices back upward, sometimes faster, as less competition means more supply-side bargaining power.
(Permanently decreased suppliers of oil may be a win for the planet in the long run, hopefully, but breaking the entire economy is perhaps the dumbest way to try to do that.)
The price signal cannot function if it can only move in one direction.