A new technique for extracting residues of oil from existing

Question

A new technique for extracting residues of oil from existing oil wells by using lignins, a by-product of papermaking, is profitable provided that oil prices are over 20 dollars a barrel. Since oil prices are rising, investors looking for companies with prospects for rapid growth in profits would be wise to invest in paper manufacturers, whose currently almost worthless by-product will soon be a profit-boosting commodity.

Which of the following, if true, most seriously weakens the argument above?

(E) The quantity of lignins produced annually in the manufacture of paper is several times larger than the amount that is likely to be useful in the oil industry.

Which of the following, if true, most seriously weakens the argument above?

(A) A small quantity of lignins are currently sold by paper manufacturers to chemical companies, but most of the lignins produced are burnt as waste.

(B) The 20-dollar-a-barrel oil price as a threshold of profitability for using lignins allows for the increased cost of refining crude oil that has been extracted using lignins.

(C) Only one-half to two-thirds of the total oil in a well can be extracted using conventional techniques of pumping and flooding with water.

(D) Petroleum-based substances that can be used as a substitute for lignins in extracting oil are costly and are made from oil, and these substances therefore increase in price as oil increases in price.

(E) The quantity of lignins produced annually in the manufacture of paper is several times larger than the amount that is likely to be useful in the oil industry.

KarishmaB · Accepted Answer

Lignins, a currently worthless by-product of paper making, can help extract oil profitably if oil prices are over 20 dollars a barrel. 
Since oil prices are rising, investors looking for companies with prospects  for rapid growth in profits  would be wise to invest in paper manufacturers.

(A) A small quantity of lignins are currently sold by paper manufacturers to chemical companies, but most of the lignins produced are burnt as waste.

The argument says that Lignins right now is worthless. This option says the same thing that a small quantity of it is sold and rest disposed off. So it doesn't add much to the argument. If anything, it supports the argument and is certainly not against it. If Lignins is worthless right now but can be put to good use, the paper manufacturers might see a big profit boost.

(B) The 20-dollar-a-barrel oil price as a threshold of profitability for using lignins allows for the increased cost of refining crude oil that has been extracted using lignins.

Perhaps so. It explains the 20-dollar a barrel threshold. It doesn't have any impact on our conclusion.

(C) Only one-half to two-thirds of the total oil in a well can be extracted using conventional techniques of pumping and flooding with water.

It explains why Lignins may be useful. Does not weaken conclusion.

(D) Petroleum-based substances that can be used as a substitute for lignins in extracting oil are costly and are made from oil, and these substances therefore increase in price as oil increases in price.

It explains why Lignins may be useful. Its substitutes are expensive. Does not weaken conclusion.

(E) The quantity of lignins produced annually in the manufacture of paper is several times larger than the amount that is likely to be useful in the oil industry.

Only a small percentage of Lignins will be used. Then we may not see the "rapid growth in profits" as predicted. It weakens the conclusion.

Answer (E)

tryingharder · Answer

this argument can be easily narrowed down to B and E rest all are beyond the facts given in the argument.

B talks about rising cost, which need not essentially impact profitability. There4 B ruled out.

The scope of the argument is broadened from  a new technique for extracting residues of oil, which is expected to be profitable if oil prices are 20$ a barrel(in premise)  to  investors looking to invest in paper manufacturing companies, whose worthless by-product will soon be a profit-boosting commodity(in conclusion) . Thus there is a gap between the two.  To weaken the argument we would need to attack the assumption . For example we could say profitability will be negatively impacted that if not as much of the new technique for extracting oil is significantly applied. Less demand in turn would affect the supply of Lignins. The by-product will soon be a nonprofit-boosting commodity. Consequently investors will not invest in paper manufacturing. E clarifies demand supply relation and attacks the assumption.

ramana · Answer

A new technique for extracting residues of oil from existing oil wells by using lignins, a by-product of papermaking, is profitable provided that oil prices are over 20 dollars a barrel. Since oil prices are rising, investors looking for companies with prospects for rapid growth in profits would be wise to invest in paper manufacturers, whose currently almost worthless by-product will soon be a profit-boosting commodity.

Which of the following, if true, most seriously weakens the argument above?

(E) The quantity of lignins produced annually in the manufacture of paper is several times larger than the amount that is likely to be useful in the oil industry.

Which of the following, if true, most seriously weakens the argument above?
(A) A small quantity of lignins are currently sold by paper manufacturers to chemical companies, but most of the lignins produced are burnt as waste. -- strengthen,worthless/waste byproduct can used to refine oil

(B) The 20-dollar-a-barrel oil price as a threshold of profitability for using lignins allows for the increased cost of refining crude oil that has been extracted using lignins. increased costof refining crude oil using lignins. again profit. stenghten

(C) Only one-half to two-thirds of the total oil in a well can be extracted using conventional techniques of pumping and flooding with water. irrelevant - drawbacks of other techniques.

(D) Petroleum-based substances that can be used as a substitute for lignins in extracting oil are costly and are made from oil, and these substances therefore increase in price as oil increases in price. Costly petroleum-based substance cant be compared to worthless by-product.

(E) The quantity of lignins produced annually in the manufacture of paper is several times larger than the amount that is likely to be useful in the oil industry. larger than required, implies only some part is used which cant be profit boosting commodity.

correct me if am wrong.

mourinhogmat1 · Answer

E it is...

I just began to realize a lot of the CR questions expect the test taker to know some supply and demand concepts. Not sure if the GMAC is tuning its test for business folks.

siddharthfrancis · Answer

Please explain why E is the answer.

aragonn · Answer

siddharthfrancis - usually GMAT does not expect someone to have any prior knowledge of anything, but basic principles are required such as this case. if some product has a huge supply then it cost cant be high. gold has high price cause its supply is restricted. more over demand is very less. if demand would have been high then it can be a debatable topic.

So paper manufacturing cant be a profit-boosting commodity on the grounds that this by product will help someone to have huge profits. Let me know if it helps.

So paper manufacturing cant be a profit-boosting commodity on the grounds that this by product will help someone to have huge profits. Let me know if it helps.

HAPPYatHARVARD · Answer

A is weakening the agreement by stating that the paper manufacturers rather than burning the excess byproduct might as well give it to the oil manufacturer for a similar cost, hence resulting in no drastic increase in the profit of the company. Though E is also weakening the agreement, A can not be neglected.

aragonn · Answer

HAPPYatHARVARD  - problem with A is that it is talking on the lines of demand but not the supply. consider the situation of A but oil companies need a lot of this waste product then this story will be different. This is why A cant be the answer.

adkikani · Answer

nightblade354   generis   VeritasKarishma   DavidTutorexamPAL   GMATNinja

Can you validate my argument reasoning and PoE?

Start with a conclusion in a weaken question.
Conclusion: Investors looking for better growth prospects in oil extraction
i.e. with more profitable margins shall be investing in paper manufacturers.

Premise:
A by-product of paper industry: lignin is more profitable to be used for oil extraction and 
lignin is a worthless byproduct for paper industry.

OK, so 1-5 % of lignin is sold to chemical companies by paper manufacturers and 80-90% is burned as waste. 
So are we saying that the effective amount of lignin available for chemical companies itself is less.
If demand for lignin is more (higher profitability for oil exraction) and supply is less then cost of
purchase of lignin would go higher. Will not this weaken the argument? More cost paid to lignin
will compensate for the profits earned by using it for efficient oil extraction

Totally irrelevant to the argument, This is like saying: the employees in a firm are not performing to their potential. 
Well anyways the overall economy is bad, so even their efficient throughput will not help in more profits.

Opposite ans, So I must use similar techniques as lignin to extract more oil.

Why oil prices increase is not my scope of argument at all.

Say paper manufacturers produce: 10 mT of lignin
Oil industry would use: 0.1 mT
I could not comprehend how would this weaken author's claim?

sahilbhatia · Answer

adkikani  Since there is some wastage involved in producing the By product 'lignin' therefore such an investment wont be profitable, thereby weakening the logic / Conclusion that Investing in Paper Manufacturing will be profitable.

Abhishek009 · Answer

Just adding my views (continuing with your calculations)

lignin is a waste product of the paper industry having negligible value , and it is scrapped/ dumped as it doesnt provide any value to the paper industry...

Now, continuing with your calculation, 10 - 0.10 = 9.90mT (99%) of lignin is not used in the new technology...

Thus, we find that there is a net increase in demand for the use of the new technology by 1%, thus this method may not be considered a profitable investment, hence it weakens the argument !!!

sssanskaar · Answer

Hi respected experts - DmitryFarber / GMATNinja / mikemcgarry , Apologies in advance if this may sound like a silly doubt

In option E, which is the correct answer mentioned here, it is said that the lignins are being made in a much larger quantity than what is useful in the oil industry. At the same time, in the argument, it is mentioned that lignins just are a worthless by-product of the paper industry. How I thought is - hmm.. so since lignins have no commercial value and even if the investors invest in the industry in which a good chunk of lignins are being wasted, the investors will still see a rise in profit because they will still use at least some lignins that are required in the oil industry and that will soon be a profit-boosting commodity, as the oil prices rise. Hence, while solving this question, initially I parked option E at the backseat because it didn't make much sense to me in terms of weakening the argument. Can you please help me understand where am I faltering in my reasoning? Yes, agreed that option E hovers on the line of "this outcome could have been better if the wastage weren't there" but it doesn't feel as if it is weakening the argument by saying something like "investors won't be seeing a rapid rise in the profits".

KarishmaB · Answer

sssanskaar  - Let me start by saying that it is the best available option.

Conclusion: Investors looking for companies with prospects for rapid growth in profits would be wise to invest in paper manufacturers.

The conclusion says that investors looking for rapid growth in profits should invest with paper manufacturers. But option (E) tells us that supply of lignis will far exceed the demand. Hence, are we likely to see "rapid growth in profits"? May be not. We may some some additional profits but rapid growth of profits is unlikely.
Hence, (E) does weaken our conclusion.

Piotrek · Answer

Hey guys, I would appreciate if someone explains me two things.

1. Could u tell me if my rationale here is correct?

E is correct, because let's say that there are 100 lignins and we use only 1 of them. Thus, it weakens the argument, because profit will be decreased by investing in these 99 that we won't use, so it's not clear whether investing in paper manufacturers is a good investment.

2. Please tell me where I'm going wrong in A. If there is not a lot of lignins, because most of them go to waste, then we can't use a lot of lignis and our potential to boost profit is limited.

KarishmaB · Answer

Currently we do not gain any profit from lignins so profit will not decrease if only 1 of them is used. The point is that the argument is claiming that we will see rapid growth in prospects but if only 1 out of 100 lignins is used, rapid growth is unlikely. So (E) weakens the conclusion.

Currently the lignins are not being used and are being burnt (because they are useless). If we can find some use for them, we will not need to burn them. So option (A) is not against our plan at all. It just reaffirms what we already know - currently there is no use for lignins.

Kratosgmat · Answer

As per E more qty is produced for lesser demand, meaning the profit will go down . you wont see "rapid profits" Hence its the best option

Raman109 · Answer

Option elimination -

(A) A small quantity of lignins are currently sold by paper manufacturers to chemical companies, but most of the lignins produced are burnt as waste. If at most (>50%) is burnt as waste, then why invest in it as the current amount may be sufficient and we don't need investments to create overcapacity. And if any chance the demands overshoots, at best it supports. Because the paper manufacturers can make profits and thus pass on that to investors.

(B) The 20-dollar-a-barrel oil price as a threshold of profitability for using lignins allows for the increased cost of refining crude oil that has been extracted using lignins. We already know it. Distortion.

(C) Only one-half to two-thirds of the total oil in a well can be extracted using conventional techniques of pumping and flooding with water. - strengthener.

(D) Petroleum-based substances that can be used as a substitute for lignins in extracting oil are costly and are made from oil, and these substances therefore increase in price as oil increases in price. - strengthener.

(E) The quantity of lignins produced annually in the manufacture of paper is several times larger than the amount that is likely to be useful in the oil industry. Exactly.

Pranavsawant · Answer

I am not too convinced about E. The argument talks about "rapid growth in profits"
Okay so E says that quantity to be used in oil industry is signifiantly lower than total amt of lignins produced. But does that mean that rapid growth in profits will not be achieved?

Right now, lignins are worthless. After this discovery, they can be a game changer for the oil industry. So they might very well still produce rapid profits. I don't see how E is a weakener. As it stands right now, all lignins are nothing but a waste. But let's say even if 5% of the lignins are used in oil industry, profits may rise substantially. Converting a waste product into an economic gain is very well a sound way to boost profits.

I agree that the other options are bad but E is so shallow. I don't understand why so many GMAT CR questions have such shallow reasoning. Not something that I've seen on the LSAT, their arguments seem to be a lot more structured and watertight.

Atleast based on my understanding, the set of arguments that GMAT considers a strengthener/weakener is much larger than that of the LSAT. So I gotta be careful and maybe be a bit more conservative before striking off an option.

A new technique for extracting residues of oil from existing

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