GRE Essay Topic 978 - The following appeared in a letter from a firm providing investment advice to a client. "Homes in the northeastern United States, where winters are typically cold, have traditionally used oil as their major fuel for heating. Last year that region experienced 90 days with below-average temperatures, and climate forecasters at Waymarsh University predict that this weather pattern will continue for several more years. Furthermore, many new homes have been built in this region during the past year. Because of these developments, 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. " Discuss how well reasoned you find this argument.
Investment advice is given grounded on solid facts, comprehensive analysis, and careful considerations. However, while the letter to the client illustrated some evidence that could be true, further investigations including more details and more logistic illustrations are needed in order to form c...
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The firm's argument that the investment in Consolidated industry is recommendable because demand for heating will increased is unpersuasive. It rests more on unsupported assumption than on evidence.
First, the firm assumes that the weather forecast will be always correct. Yet it might be possible that the weather forecast that the below average temperatures will continue may not be correct. In contrast to the weather forecast, the temperature may be less cold than expected. If it were that case, the demand for heating oil would not increase. Since the firm does not provide any evidence to show the probability that weather forecast predict correct weather, I find the argument weak.
Second, the firm makes an assumption, new homes that have been built during recent years installed equipment that consumes oil to heat homes up. However, it might be entirely possible that new homes employed new equipment that used electricity to warm up their house. To avoid the financial impact from fluctuation of the oil price, the new home's owner chose new heating equipment. To draw the firm's conclusion, we need more information to explain the new homes installed the same equipment that is installed in the traditional houses.
Finally, the firm makes another assumption that increasing demand for heating oil allows the Consolidated industry to make more profit. But, it may be possible that the profit of the industry will not change or decline. For example, because of the increasing demand, cost to acquire oil may increase. As a result, although the industry may increase the retail price, the profit from the selling may not change. Alternatively, the economic depression may happen. In that case, financial status of the industry may become worse. To strengthen the firm's argument, the firm should present us more evidence to show the relationship between the increased demand for heating oil and profit of Consolidated industry.
In conclusion, for the reasons I mentioned above, the argument of the firm is unconvincing. If the firm had given information about the aforementioned point, the argument would have been more logical.