When the pancreas "burns out"....that is the cells that make insulin die (for whatever reason)....then you will need insulin.

That happens for some type II diabetics.

The oral drugs may be lowering you too much, and then the liver kicks in and stimulates glucose production, and this is not very accurate (it is an emergency response mostly)...and overshoots.

Some people on oral drugs for diabetes develop pancreatitis. If this is happening to you, it can be destroying your pancreas slowly and its ability to make insulin.

It is also possible to be come type I in adulthood. I've known some people who have who were over 40. They were misdiagnosed and their A1C's continued to climb inspite of oral meds and conservative living. Type I is an autoimmune disease, and can follow a viral infection or other trigger.

The tests for diabetes are only range markers.
Here is an A1C calculator:
http://professional.diabetes.org/glucosecalculator.aspx

You can see that an A1C of 8 correlates to an average daily blood sugar of 183. Morning glucoses can be tricky and once they elevate, do not necessarily correspond to A1C. In my case I have an elevated morning of about 130-140...but during the day my glucoses are 120 or less (2 hrs after eating). My A1C is 6.2.

Other causes of elevated glucose besides exercise, is infection.
If you have an infection (say in your kidneys), it will elevate glucose. A viral infection will also. You should be using a glucometer during the day to see if your exercise is too brisk, and should be done more moderately, or if you have some other stress trigger. Do a morning fasting, and 1 hr and 2 hr after each meal to see what is going on with your food choices. This can be very helpful.

But in the end, it is not really a failure of your lifestyle efforts, because the pancreas can fail on its own, due to other factors.
In fact some oral drugs may actually cause pancreatitis! Diabetics tend to have more pancreatitis than nondiabetics (after adjusting for alcohol consumption).

There is a saying that "one needs to eat to lower blood sugars", and diabetics should not fast without a doctors approval.

Using a long acting basal type insulin at bedtime, like Lantus, may be all you need. I wouldn't fight that, as it is not so complicated to do and may result in much improvement for you.