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Oil producers get a high price for their oil when market supply is low

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SVP
Joined: 14 Apr 2009
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Oil producers get a high price for their oil when market supply is low  [#permalink]

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23 Jul 2013, 13:25
3
7
00:00

Difficulty:

55% (hard)

Question Stats:

59% (01:31) correct 41% (01:57) wrong based on 476 sessions

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Which of the following most logically completes the passage?

Oil producers get a high price for their oil when market supply is low. But the price drops sharply when oil supplies are abundant. Thus, in high-output years, some oil producers keep oil stockpiles for one or two years, hoping to sell at higher prices in the future. This year's market supply of oil was the lowest in five years. It is nonetheless quite possible that a portion of this year's oil production will be stored into stockpiles, since _____________ .

(A) each of the last two years produced record breaking oil output
(B) the viscosity of this year's oil is no lower than the viscosity of the oil produced in each of the previous five years
(C) oil prices have not been subject to sharp fluctuations in recent years
(D) for some oil producers, this year's production was no smaller than last year's
(E) the practice of holding back part of one year's crop had not yet become widespread the last time the oil output was as small as it was this year
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Re: Oil producers get a high price for their oil when market supply is low  [#permalink]

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23 Jul 2013, 16:24
1
GMATPill wrote:
Which of the following most logically completes the passage?

Oil producers get a high price for their oil when market supply is low. But the price drops sharply when oil supplies are abundant. Thus, in high-output years, some oil producers keep oil stockpiles for one or two years, hoping to sell at higher prices in the future. This year's market supply of oil was the lowest in five years. It is nonetheless quite possible that a portion of this year's oil production will be stored into stockpiles, since _____________ .

(A) each of the last two years produced record breaking oil output
(B) the viscosity of this year's oil is no lower than the viscosity of the oil produced in each of the previous five years
(C) oil prices have not been subject to sharp fluctuations in recent years
(D) for some oil producers, this year's production was no smaller than last year's
(E) the practice of holding back part of one year's crop had not yet become widespread the last time the oil output was as small as it was this year

A wins as it clearly puts the premise into practice.
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Re: Oil producers get a high price for their oil when market supply is low  [#permalink]

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23 Jul 2013, 22:08
1
Okay let's see if my logic is correct for the reasons I eliminated.

GMATPill wrote:
Which of the following most logically completes the passage?

Oil producers get a high price for their oil when market supply is low. But the price drops sharply when oil supplies are abundant. Thus, in high-output years, some oil producers keep oil stockpiles for one or two years, hoping to sell at higher prices in the future. This year's market supply of oil was the lowest in five years. It is nonetheless quite possible that a portion of this year's oil production will be stored into stockpiles, since _____________ .

(A) each of the last two years produced record breaking oil output Thus the oil companies would like to maximize their profit potential this year. So in a tough battle with C, A wins.
(B) the viscosity of this year's oil is no lower than the viscosity of the oil produced in each of the previous five years Nothing is mentioned about viscosity. Irrelavent.
(C) oil prices have not been subject to sharp fluctuations in recent years Very tempting, but the lack of a reason why stopped me from picking this answer.
(D) for some oil producers, this year's production was no smaller than last year's Incorrect use of the word smaller.
(E) the practice of holding back part of one year's crop had not yet become widespread the last time the oil output was as small as it was this year Same as D.

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Re: Oil producers get a high price for their oil when market supply is low  [#permalink]

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29 Jul 2013, 09:16
Here is how we would have thought of it at GMATPill.

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Re: Oil producers get a high price for their oil when market supply is low  [#permalink]

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29 Jul 2013, 09:20
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1
Cont'd:

Quote:
(C) oil prices have not been subject to sharp fluctuations in recent years [Very tempting, but the lack of a reason why stopped me from picking this answer.]

The issue with (C) is that knowing that price has not changed recently...this does not help show why this year (low supply) we would put some into storage/stockpiles? What is the benefit of putting away into storage? They wouldn't necessarily catch a higher price in the future cuz we don't know if supply is low in future and price is high so it can be taken advantage of. That connection is missing.
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Re: Oil producers get a high price for their oil when market supply is low  [#permalink]

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17 Apr 2015, 19:18
Please correct the typo in Choice E
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Re: Oil producers get a high price for their oil when market supply is low  [#permalink]

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28 Oct 2015, 04:24
i marked D ; i did extra thinking this time . should have made a clear and simple approach, clearly its A .
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Re: Oil producers get a high price for their oil when market supply is low  [#permalink]

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07 Jun 2019, 07:57
Hi Experts,

Can someone please explain why A is correct. I am still not clear.

Regards,
Ashwin

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Re: Oil producers get a high price for their oil when market supply is low   [#permalink] 07 Jun 2019, 07:57
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