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60) The following appeared in a letter from a firm providing investment advice for a client.
Most homes in the northeastern United States, where winters are typically cold, have traditionally used oil as their major fuel for heating. Last heating season that region experienced 90 days with below-normal temperatures, and climate forecasters predict that this weather pattern will continue for several more years. Furthermore, many new homes are being built in the region in response to recent population growth. Because of these trends, we predict an increased demand for heating oil and recommend investment in Consolidated Industries, one of whose major business operations is the retail sale of home heating oil.
Write a response in which you examine the stated and/or unstated assumptions of the argument. Be sure to explain how the argument depends on these assumptions and what the implications are for the argument if the assumptions prove unwarranted.
In this letter, the writer recommends to invest in Consolidated Industries for retailing home heating oil based on the assumption that home heating oil would be needy since most homes in the northeastern United States where are typically cold and the weather pattern would continue for several more years based on the climate forecasters, have used oil as their major fuel for heating. Furthermore, the writer seems to assume that many new homes' being built in that region means the market would be larger. Though it seems reasonable at first glance, it is in fact ill-conceived and reasons are as follows.
In the first place, the writer seems to assume that even last heating season the region experienced 90 days with below-normal temperatures, so oil as their major fuel for heating would be demanding, thus investing in Consolidated Industries would be wise. However, there's no information about the weather situation of recent years. It is possible that the region experienced 120 days with below-normal temperatures before last season, thus last season would be a really heating season that the demand for oil would be lower than fore years. And if the weather pattern which would continue for several years would be less and less cold, the future demand for oil would be lower and lower. Therefore it is unnecessarily reasonable to say that based on the weather pattern the fuel of oil would be necessarily demanding, thus investing in Consolidated Industries would not be necessarily wise.
In the second place, the writer seems to assume that many new homes' being built in the region shows the population there would grow thus more people need oil for heating and the investment advice is reasonable. However, many homes' built there doesn't mean that people would necessarily move into these homes. It is possible that the rent of these houses is so expensive that people cannot afford it, and maybe there always have traffic jams... All these may stop people living in these homes, thus even the weather would be colder and colder, the demand for home heating oil would be unnecessarily higher, and therefore the investment advice may be unwise.
Finally, the writer seems to assume that based on the trends of home heating oil's increasingly demanded and larger market, investing in Consolidated Industries to retail home heating oil would be profitable. However, even if the trends are likely to become the truth, it is unnecessary to be profitable to invest in Consolidated Industries. Since it is possible that most communities there would demand for this home heating oil by contracting with some large companies, and Consolidated Industries one of whose major business operations is the retail sale of home heating oil may cannot compete with those large companies, thus investing in Consolidated Industries may be not profitable.
In conclusion, the ill-conceived assumptions that demanding for home heating oil would be higher and higher and the home heating oil's market would be larger and larger lead the writer's recommendation to invest in Consolidated Industries to an unconvincingly reasonable one. |
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