does this mean oil has failed?
The difference is that you need oil and probably 9/10 families have at least 1 thing that runs on oil (or gas made from it), be it a car, a motorcycle, a pump, lawn mower or a generator.
Is there anything physical that would cease to work if bitcoin disappeared? The only thing I can think of is mining hardware.
Yes. People's ability to transact fast and cheap over long distances.