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 twenty days with below-average temperatures, and local weather forecasters throughout the region 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.”
Write a response in which you discuss what specific evidence is needed to evaluate the argument and explain how the evidence would weaken or strengthen the argument.
The letter writer is arguing that demand for heating oil in the northeastern United States will increase because of recent colder-than-normal winters. He says that this increased demand will be met in part by the increased supply of heating oil due to the recent construction of new homes. However, he fails to make any mention of possible decreases in demand due to alternative energy sources, such as natural gas, or to alternative heating methods, such as electric heat. Neither does he mention the possibility that these new houses may be built with insulation or other features which make them more energy efficient and less dependent on heating oil.
The writer states his belief that heating oil is a prudent investment, and presents Consolidated Industries as an appropriate choice. He states that demand for heating oil on the increase will support Consolidated’s profits. He provides no data to support his assertion, but one can assume it is based on the firm’s share of the heating oil market. This assumption, however, is flawed, as regional demand for heating oil varies from year to year. If temperature extremes have indeed become a trend, this would also impact the demand for heating oil. For example, one recent record cold period in the northeastern United States led to a decrease in heating oil demand, as people applied what they had stored in their tanks to their heating systems. Recent weather patterns in the northeastern United States have been mild, and heating oil demand has not increased.
The writer also claims that construction of new homes will increase the supply of heating oil. This is only partially true, as new construction is also dependent on other factors. New homes must be built in an area that can support the development. Fuel prices and availability of labor are additional considerations. The price of heating oil has been increasing steadily for many years. While demand for heating oil has increased, the cost of heating oil has steadily risen. As a result, builders are less willing to build in expensive regions. In addition, there is great competition for workers in the construction industry. In 2018, the American Institutes for Research projected that over the next decade, 1.6 million construction workers will be needed, but only 1.3 million will be available. The shortage of labor is very likely to affect new construction, and will affect both new and existing homes. Unless the price of heating oil drops or the availability of labor increases significantly, new homebuyers are likely to be less interested in building new houses in areas which rely on heating oil.
Alternative fuels are also becoming more popular in the United States, and natural gas has become more common for home heating. Natural gas produces fewer carbon emissions than heating oil. While natural gas production has increased, pipeline capacity has not kept pace with the increased production. Because pipeline capacity is finite, some natural gas producers have resorted to sending gas by truck. This increases transportation costs. In addition, some homeowners choose to install natural gas systems instead of oil systems, thus reducing demand for heating oil. The increased use of natural gas, while good news for the environment, may also reduce demand for heating oil.
The author does not provide data about either existing or new houses built in the northeast of the United States. Without this information, it is impossible to determine if the houses are designed to be energy efficient. Some new houses are built with insulated walls, roofs, and floors, making them more efficient and easier to heat using an alternative fuel than older homes. Some older houses have been retrofitted to make them more energy efficient. Thermal insulation is an important element of energy conservation. Without information about existing and proposed houses in the areas which rely on heating oil, it is impossible to determine whether these new houses will be more environmentally friendly than the older houses or more energy efficient.
The writer states that Consolidated Industries has a major business selling heating oil, but that the company also manufactures chemicals. While the company probably sells some heating oil, no mention is made of other products the company sells. It is possible that Consolidated Industries sells other products that depend on heating oil sales. For example, the company may sell glycol, an additive used in heating oil, and its sales depend on heating oil sales. If demand for heating oil decreases, demand for glycol will also decrease, which could have a significant impact on Consolidated Industries.
The writer makes several key assumptions in formulating his argument. Without evidence that demand for heating oil will increase, or that demand for heating oil will increase because of new construction, the letter writer’s assertion that demand for heating oil will rise is based solely on speculation. The assumption that new construction will increase the supply of heating oil is similarly flawed. The possibility that alternative fuels and methods of heating, such as natural gas and electrical heat, will significantly reduce demand for heating oil also cannot be considered. The absence of evidence weakens his argument, and the letter writer’s recommendations are ill-supported.