Oil

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Oil

by theCodeToGMAT » Mon Oct 21, 2013 9:37 am
Since 1995, Congress has exempted oil companies that have leases issued by the federal government allowing them to drill for deep-water oil off the Gulf of Mexico from royalty payments as an incentive to spur development in times of low oil and gas prices. These leases were supposed to have included a provision that reinstates the royalties should the market prices of oil and gas exceed a certain level. Because of an error by the federal government, however, the language that reinstates the royalties is missing from the more than 1,100 leases issued by the U.S. government in 1998 and 1999. Since the market price of oil and gas has recently risen far above the threshold levels, this error could allow the oil companies to reap a windfall of more than $10 billion through the life of the leases. In response, the government is pressuring the oil companies to renegotiate the leases. The executives of the oil companies strongly oppose renegotiation; all have issued statements stating that they expect the government to honor the terms of the contracts and that renegotiating a duly signed agreement would set a bad precedent.

Which of the following statements best reflects the position of the oil company executives?

{A} Opportunity seldom knocks twice.
{B} Do unto others as you would have done unto you.
{C} One man's loss is another man's gain.
{D} You don't change the rules in the middle of the game.
{E} Revenge is so sweet

Answer [spoiler]{D}[/spoiler]
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Source: — Critical Reasoning |

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by Mike@Magoosh » Mon Oct 21, 2013 12:29 pm
Dear theCodeToGMAT,
I'm happy to help. :-)

Here's a general blog about approaching GMAT CR questions:
https://magoosh.com/gmat/2012/save-time- ... questions/
although this one is a bit of an oddball.

It's clear that the government made a mistake in the original negotiations, and now, in times when the oil prices are soaring, the oil companies are taking advantage of this mistake in a way that might be considered cheating, or at least getting away with something morally questionable because of a legal loophole.

Which cliche best captures the oil companies' position?
(A) Opportunity seldom knocks twice.
Hmm. The companies have taken advantage of a kind of opportunity. This saying is more to encourage someone in doubt to go ahead and take advantage of an opportunity. It's not about retaining advantages one has already seized. This is not correct.

(B) Do unto others as you would have done unto you.
This is one formulation of the Golden Rule, a high moral standard (cf. Luke 6:31). Very little about the oil companies' behavior in this question (or in real life!) comports with this standard. Moreover, there is no reciprocity described in the question --- the oil companies and the government are not in a position to do the same things to one another. This is incorrect.

(C) One man's loss is another man's gain.
In a way, this is true, and this may be a neutral third-party's formulation of what's going on. The problem is: the oil companies with this gap in their leases are clearly the ones who are gaining, and there would be something morally reprehensible about their pointing this out. A third party could observe it in an objective way, but if for someone who is clearly gaining to point this out to someone else clearly losing is to rub salt into a wound. It would not be in the diplomatic interest of the oil companies to hold this position. This is incorrect.

(D) You don't change the rules in the middle of the game.
This is a plausible justification of the oil companies' position. This would be an appeal to an objective standard about why it's permissible to maintain the status quo, and it makes no mention of the embarrassing fact that the oil companies are obscenely benefiting from this same status quo. This would be a very diplomatic defense for the oil companies to make.

(E) Revenge is so sweet
It's not clear who would want revenge against whom. If anything, the oil companies have swindled the government and have derived windfall profits by morally suspect means. If anything, the government would want revenge on THEM, so the oil companies most certainly would not want to encourage that! This is incorrect.

The only plausible answer is (D).

Does all this make sense?
Mike :-)
Magoosh GMAT Instructor
https://gmat.magoosh.com/

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by theCodeToGMAT » Mon Oct 21, 2013 6:42 pm
Thanks Mike for such a clear explanation!
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