Consolidated Oil Industries, or COI, has a firm grasp on what its customers want. The company claims that it knows ‘most homes in the northeastern United States, where winters are typically cold, have traditionally used oil as their major fuel for heating,’ and because of this, COI foresees an increased demand for home heating oil. COI’s assumption is that its customers desire heat, and that heat is more effectively produced through the use of oil than through alternative energy sources. However, this belief is questionable. In reviewing the company’s claims, three assumptions appear to be embedded in the argument: 1) most homes have traditionally used oil as a heat source; 2) the northeastern United States experiences cold temperatures; and 3) the northeastern United States is growing. These three assumptions appear to greatly influence COI’s view of its customer base and the future of its business.

On the assumption that most homes in the northeastern United States have traditionally used oil as a heat source, COI is assuming that its customers have, in the past, used oil exclusively as a heating source. However, this assumption is false. The northeastern United States has long had cold winters. Over the past century, advancements in residential heating technology have made it increasingly easier and less costly to heat homes using only electricity, natural gas, and propane. Meanwhile, heating oil prices have soared. In 2006, the average price was $2.79 per gallon; in 2014, the price was $4.76 per gallon. During the same period, natural gas prices have remained stable and have fallen slightly; in 2006, the average price was $4.06 per gallon; in 2014, the price was $3.79 per gallon. The move to alternative heating technologies has made heating oil more expensive and less popular. A person with an existing oil-fired heating system may find it difficult to justify the expense of converting to an alternative fuel source. COI’s assumption that its customers prefer oil as a heating source may be accurate for those homes that still use oil, but the company’s prediction of increased demand is likely to be inaccurate.

On the assumption that the northeastern United States is cold, COI is assuming its customers want to heat their homes. However, this assumption is also misguided. The northeastern United States is, indeed, cold in the winter. However, the region’s climate varies considerably from one city to the next. Boston and New York City experience mild winters. Both cities regularly experience temperatures below zero Fahrenheit, but temperatures rarely fall below −20F. In contrast, winters in Hartford and Providence, the two largest cities in Connecticut, can be bitterly cold, with temperatures dipping well below zero Fahrenheit. Residents of Boston and New York City typically purchase heating oil as an emergency measure. Many homeowners install back-up heating devices, such as electric space heaters, propane space heaters, kerosene heaters, and space heaters powered by electricity or natural gas. These back-up heating devices allow homeowners to use oil as a supplemental heat source. However, these devices are not necessary for some homeowners. For example, many New Englanders live out in the country. These residents have large, well insulated houses that keep them warm with relatively little heating assistance. Furthermore, some homeowners have built large solariums, which they use as additional sources of heat. COI’s assumption that its customers desire heat is questionable, since the northeastern United States is warm in January and February and cooler in December and January.

On the assumption that the northeastern United States is growing, COI is assuming that new customers will purchase heating oil. However, this may not be true. Most homeowners are not aware that heating oil is a fossil fuel. When oil prices rise, some homeowners purchase solar panels or solariums, while others install solar hot water heaters. These homeowners reduce their use of heating oil. Energy efficiency is improving; more homeowners are installing programmable thermostats, using LED bulbs, and insulating their homes to reduce utility bills. These homeowners may use heating oil less frequently than in the past.

COI’s assumptions about its customers and the future of its business are questionable. COI’s assumption that most homes in the northeastern United States have traditionally used oil as a heat source is false. Its assumption that the region’s climate is cold is also questionable, since Boston and New York City experience mild winters. COI’s assumption that the northeastern United States is growing may be incorrect, since many customers are switching to alternative forms of heating. If COI’s assumptions prove unfounded, the company will struggle to meet increased demand for heating oil.