1. The belief that growth is assured by an expanding and more affluent population;
2. The belief that there is no competitive substitute for the industry’s major product;
The Idea of Indispensability.
The petroleum industry is pretty much convinced that there is no competitive substitute for its major product, gasoline—or, if there is, that it will continue to be a derivative of crude oil, such as diesel fuel or kerosene jet fuel.
There is a lot of automatic wishful thinking in this assumption. The trouble is that most refining companies own huge amounts of crude oil reserves. These have value only if there is a market for products into which oil can be converted. Hence the tenacious belief in the continuing competitive superiority of automobile fuels made from crude oil.
This idea persists despite all historic evidence against it. The evidence not only shows that oil has never been a superior product for any purpose for very long but also that the oil industry has never really been a growth industry. Rather, it has been a succession of different businesses that have gone through the usual historic cycles of growth, maturity, and decay. The industry’s overall survival is owed to a series of miraculous escapes from total obsolescence, of last-minute and unexpected reprieves from total disaster reminiscent of the perils of Pauline.