With oil prices down more than 15% over the past three months, it might seem strange that billionaire investor Warren Buffett's Berkshire Hathaway is doubling down on Occidental Petroleum, which is down 4% since January 1.
The Berkshire stake in Oxy has now grown to almost 28%. I Photo: Oxy Facebook
However, Buffett buys when stock prices are down.
The Berkshire stake in Oxy has now grown to almost 28%, as reported by Brian Swint for Barron’s Daily. Buffett also says he likes to bet on the US, and his Oxy wager can be seen as one.
The company agreed to buy privately-held CrownRock earlier this month for $12 billion for extensive shale acreage in the Permian Basin in West Texas and southeastern New Mexico.
The revival of the onshore US oil industry has been a significant energy story. The world's biggest economy is now also its largest crude producer at around 13 million barrels a day.
The rise of shale oil helps stabilize the world market. If Islamist rebels attack ships in the Red Sea, or the Organization of the Petroleum Exporting Countries (OPEC) decides to restrict output, US producers can step up.
To be sure, even though OPEC’s grip on the global market has weakened somewhat – Angola leaving the bloc is the latest illustration – it's still strong. Oil prices can fluctuate a lot with only small changes in supply and demand. With discipline, OPEC will have little trouble putting a floor under prices next year.