This is not extreme, let assume continuously 2x more transactions are sent every 10 minutes than can ever be included in the blockchain, it means half of the sent transactions can never confirm. There will be such fee outbiding to ever be included to the blockchain, the fees will continuously rise until those who do not want to pay high fees simply give up on Bitcoin as it will become too expensive and uncovient for them to use Bitcoin anymore.
It is extremist unless you have a research paper to back up your assumptions. For this to happen, it would take a long time. The fees would not rise to insane levels over a night, day, few days/weeks. The fees in their current state are worthless.
Obviously over the months the market will find equilubrum on the fees people want to pay, but if there is ongoing adoption, the richest/institutions will be able to use Bitcoins only, while most others simply find out cheaper ways. Probably comparable maximum fee to international bank wire transfer fees, unless richest/institutions will find Bitcoins more interesting to make fees even higher. I talk about next decade Bitcoin might have fees like international bank wire transfer fees, not next year.
Lets face it, it is centralisation because only high fee transaction can be used on Bitcoin in this scenario, the funny part those advocating very small blocks to allow fee market to develop want keep Bitcoin nodes decentralized, yet they centralize the use of Bitcoin only for high fee transactions (probably only high value transactions).
The point is continuosly keep increasing block sizes for this scenario never happen, this way you dont centralize Bitcoin use to only the elite paying high fees.
So you're telling me that because some people would be unable to pay the transaction fee that we should give up decentralization (one of the fundamental points of Bitcoin)? Once we lose that decentralization, we might as well abandon Bitcoin as it will be much weaker than it was before. You can not keep increasing the block size to suit the volume just because there is a need for it (I'm not saying that there is, now). This would effectively either damage or kill Bitcoin in the process. There is only so much that the network sustain at a certain time.
If you do not keep increasing the block size to suit the volume, you loose decentralization because only some will be allowed to use Bitcoins while making Bitcoin expensive for the others. We already have mining centralization and even Satoshi envisioned there will be node centralization in future, but Satoshi and many current Bitcoiners never wanted to make Bitcoins useable only to the elite.