argument 60

kaileezhu

It is true that home heating oil business tend to thrive in cold areas, however, jumping to the conclusion that we should invest in

Consolidated Industries is too hasty and ignorant of many important factors: Residents in cold areas may switch to more sustainable

resources; increasing number of residents may not be gauranteed; and harsh competition may jeopardize the profit of oil industry.

First and foremost, residents are very likely to abandon the traditional way of heating if they can forsee the large expense

associated with it. Since the below-normal temperature persisted over 90 days last season, it should be clear to the residents how

expensive it was to use oil as heating avenue. Assuming the climate forecasters are accurate, this pattern will continue for several

years, which means a even bigger bill to the household and a greater financial burdan. Many residents will look for cheaper and more

sustainable heating options, such as electricity, wind energy and solar energy. It is an overestimation, therefore, to include the

residents who has bought oil before in the target market given that many of them will not buy home heating oil any more. Even if they

do, they may use oil interchangeably with cheaper energy resources to reduce the total cost of heating. As a result, the actual

consumption of oil may even decrease in the near future.

The exaggerated number of potential customers is not only due to the assumption that past costumers will be royal, but also derived

from the flawed logic that new homes equaled to more immigrants. Even though new homes are being built and population increases

recently, it is unclear how much the increase is and whether the increase will continue in the next following years. There could be

only a small and unremarkable amount of increase in the population, thus having no impact on the oil market. New homes can not

accurately prediet the market needs, either. Furthur research about the sales of new homes are needed in order to drive a compelling

conclusion of the actual increase in population.

Last but not least, even though all the residents stick to the oil as heating option and a large number of increase in population

also means more furture costumers, the flourish of oil industry can not be gauranteed. In deed, when there is huge demand, there are

lots of providers who are very likely use low price as a stradege to win over customers. The previous reasonable price is not

competitive enough, therefore companies are forced to decrease the price. Not surprisingly the profit will be very low. We will

inevitably fall into a dillema that low price brings no profit while high price brings no customers, which in turn brings no profit.

Therefore, it is not a wise investment when harsh competition in the market are clear.

In conclusion, the uncertainty of the popularity of oil as heating option, of the increase in population and of the future of the

market make investment in Consolidated Industries unresonable.