This argument is generally pursuasive to me most of the time. Should I be convinced otherwise in the present case. -a layman.
But also, even if there was vastly more oil than thought, that wouldn't matter because if you dig it up and burn it, Earth turns into Venus. Peak "oil we can afford to dig out without fucking ourselves over thoroughly" is already in the past and receding.
If just one of the big banks were to fail it could take down the entire economy along with it. Even after all the stress tests... Because they don't count the interconnectedness of these backs.
For this reason even the Libertarian and staunch capitalists should be clamoring to break them up into smaller chunks. There's no reason why such an action should be bad for investors or the banks themselves. It could merely be a forced diversification.
If government intervention can prevent a lot of people falling into poverty/homelessness at the cost of slightly delaying technological progress, I think that can be a price worth paying.
So in a more general sense, why not simply pay the workers of an obsolete industry? I'm not sure I have a good answer to that, since I'm not educated in economics. But I would guess that a dying industry can still generate net wealth, just not enough to sustain itself. It depends on how much of its costs are labor vs infrastructure.
An industry that cannot generate enough wealth to sustain its infrastructure is probably generating negative net wealth, and it's better policy to let it die and give money directly to the workers.
But if an industry can sustain its infrastructure without government help, but it can no longer afford the labor costs, I think the industry can still generate positive net wealth for society if the government plugs that gap. The portion of the money the industry is paying out of its own pocket to its workers is already net gain for society, why throw that away?
Protectionism has its place, but we should fully evaluate the cost, damage and benefits created by protectionist policies before implementing them, otherwise you end up with massively subsidized US corn crushing our NAFTA partner's agriculture industry, and Chinese Steel being dumped on the US at significantly lower prices than the US Steel industry can produce said metal at (mostly due to Chinese state subsidies, just like our agribusiness subsidies).
Note that I did not claim that protectionism should be the default policy. My only claim is: it would be silly for a government to refuse to consider protectionist solutions to certain problems, simply because capitalist dogma says it shouldn't.