The firm predicts in the letter the increasing demand of heating oil in the northeastern United States this winter and offers an suggest to the client of investment in a major company retailing the heating oil for home. As the evidence the firm points out the lasting 90 days with below-normal temperatures last season and a prediction of continuous cold winter from a climate forecasts. However, this recommendation is based on some assumptions that might be challenged in certain conditions. The major problematic assumption is that the firm believe the cold days present are necessarily to cause increasing use for heating oil. In the argument the firm provide evidence of 90 days with temperatures below normal level in last season, and thus predicts it will be a colder winter. But if this normal level was just over zero and in those 90 days most were a little lower than the average, than it might not be so cold and of course the heating is not a must for most homes since it might be a warm winter. So the assumption of 90 days below-normal temperatures can be challenged and thus the prediction is questionable. Even if it is a extreme cold winter and heating in homes demand is in upsurge, the oil might not be increasingly used as a way of heating. The firm simply make a assumption that the population of heating oil is parallel to the past years. It is true that ordinary the local use oil as a major way to heat, but condition might change under lots of factors. For instance, if this winter, the natural gas as a heating thing becomes largely encouraged by the local communities and most of the local are covered by new natural gas pipelines that the local relinquish oil as heating method considering environmental protection, then there might even be an decline in using heating oil. In the situation the investment in the Consolidated Industries is really unwise. Permitted that the oil is still a major way for heating, another assumption is in question that the increasing houses are certainly to cause proportional increasing usage of heating oil and investment. There are chances that the houses are too expensive to be afforded by the local people or the location is so far away from the downtown that there are few residents and thus few oil consumption. In this case, the assumption is invalid. In addition, the investment of Consolidate Industries needs to be based on the assumption that this fund will bring profits to the investor. But with problematic assumptions above, whether there is huge market of heating oil and whether the Consolidated Industries can earn benefits are open to discussion. It can be attributes to lots of other factors for a company to gain, such as price, service quality and income of the local families and so on,. Maybe another big company selling oil is far more profitable than the Consolidated Industries . Will investor choose Consolidated as a good choice for investment when the benefit is little? In conclusion the argument made by the firm is unpersuasive in that it is based on some questionable assumptions and thus leasing to problematic prediction and recommendation. the firm simply assumes the lasting 90 days with below-normal temperatures means a colder winter and the residents will continue to choose oil as heating method. But when weather conditions and people selections are varying and uncertain, these assumptions can not lead to the increasing usage of oil. In a market with unstable or even decline demand, the investment really needs consideration.
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