In advocating for expanded U.S. oil production, former President Donald Trump finds alignment with renowned investor Warren Buffett, whose Berkshire Hathaway Inc. holds a notable stake in Occidental Petroleum Corporation. This collaboration reflects a shared mission to boost domestic energy output, echoing sentiments from Trump’s tenure, where regulatory barriers were relaxed to cultivate energy independence and counteract a history of reliance on foreign oil imports.
Buffett’s annual letter to investors showcased his admiration for companies engaged in local oil projects, a stark contrast from the meager 10 million barrels per day produced in the 1970s. The landscape altered significantly by 2007, marking a low point of 5 million b/d. Simultaneously, the creation of the Strategic Petroleum Reserve in 1975 aimed to mitigate – albeit insufficiently – the erosion of American self-sufficiency. Then came the watershed moment in 2011 when shale economics emerged as a viable option, heralding the end of energy dependency.
The shift signaled a remarkable resurgence, with U.S. production surpassing 13 million b/d and diminishing OPEC’s hegemony in the global oil market. Berkshire Hathaway’s robust 27.8% stake in Occidental Petroleum underscores its faith in the company, a Houston-based multinational powerhouse steered by considerable investments in the Permian Basin, alongside traditional drilling ventures in the Middle East, Canada, Chile, and a burgeoning carbon capture initiative.
Notably, Berkshire Hathaway’s confidence extends beyond its stake, backed by warrants enabling future ownership expansion at a fixed price. Buffett’s enthusiasm for Occidental’s extensive U.S. holdings and pioneering carbon capture endeavors underscores a strategic alignment with national interests, even as the efficacy of carbon capture remains to be fully established.
A Strategic Standpoint
While lauding Occidental’s contributions, Buffett clarified that Berkshire Hathaway has no intention to acquire or manage the company. He commended Vicki Hollub’s leadership and affirmed a steadfast commitment to retaining the investment in Occidental indefinitely.
Acknowledging the uncertainties surrounding oil price fluctuations, Buffett commended Hollub’s adeptness in oil extraction, an invaluable skill benefiting both shareholders and the nation at large, showcasing a unique talent in a critical sector.
Berkshire Hathaway’s current 27.8% stake in Occidental values at approximately $14.7 billion at the current share price of $60. Additionally, the firm holds a substantial $18.8 billion position in Chevron Corp. Despite Berkshire Hathaway’s significant ownership, Occidental’s stock trajectory has been volatile, oscillating between record highs in 2011 and a relatively stable range of $60-$70 since the outset of 2023.
Now Read: Berkshire Hathaway’s Q4 Operating Earnings Surge 28%, Warren Buffett Pays Touching Tribute To Late Charlie Munger
Photo: Shutterstock and Fortune Live Media on Flickr
