The following appeared in a letter from a firm providing investment advice for a client."Most homes in the northeastern United States, where winters are typically cold, have traditionally used oil as their major fuel for heating. Last heating season that

The investment firm is advising their clients to put their fortune on a firm called Consolidated Industries. This firm conducts retail sale of home heating oil a one of their major business operations. Since the abnormally low temperature of winter in the northeastern United States seems to continue for next few years, the arguer recommends investment in Consolidated Industries. Moreover, the demand for heating oil is predicted to rise with more homes are being constructed in the region due to recent population growth. Nevertheless, the investment advisor's recommendation is unlikely to make his clients wealthier because his letter contains assumptions and logical holes in it.

Initially, the arguer is assuming that the climate forecast made is accurate and believable. Like any other sorts of forecasts, however, the climate forecast faces the risk of correction depending on changing circumstances. The rate of global warming might fasten so much that the northeastern Unites States recovers its ordinary climate the very next year. In order to strengthen his assertion, the arguer should verify that the suggested climate change would surely continue with plausible explanations.

Even if the colder weather in the region is to continue for next few years, it does not necessarily result in an increase in demand for heating oil. This is because heating oil is not the only possible energy source for heating. Electricity, gas, and coal are all alternative source of warming their houses. Thus, residents are always capable of changing their source of heating whenever the heating oil gets too expensive. The increase in profit of Consolidated Industries would be realized in only limited amount if the rise of demand for heating is to be canceled out with more demand for alternative energy sources.

Moreover, the investment advisor is assuming that newly built homes are going to consume heating oil as their primary heating method. With the changing climate, however, the newly built homes are likely to adopt better insulation and heating system than ordinary houses in the region. Then, the demand for heating oil would not increase as much as the investors anticipated.

For an investment to be successful, the value of invested firm must increase significantly. However, the invest advisor is failing to show how large heating oil retail division is in Consolidated Industries. Even if heating oil business is actually prominent regardless of all the assumptions made by the advisor, the investment would bring prosperity to investors only if the firm value rises. In case the firm makes only one or two percent its profit through heating oil retail, the investment would fail if other main divisions of the firm malfunction in the market. Therefore, the arguer should prove that the heating oil business takes a significant part in the profit of the firm.

If the suggested climate change can link to increase in the firm value of Consolidated Industries, the clients of investment firm would enjoy large fortune. However, it seems like the clients should wait for supplemental letter from the investment advisor before making decisions because the current letter is making too many assumptions.