Warren Buffett returns to the attack against climate change and the energy transition. Despite receiving endless pressures from climate agents and international regulations, the tycoon refuses to stop investing in fossil fuels such as gas or oil. This has been assured by the same ‘Oracle of Ohama’ who is taking advantage of the fall in the prices of raw materials this year, to strengthen its investments in these products.
According to Bloomberg, Buffett launched a few years ago to invest through Berkshire Hathaway in the sector have become his favorites. According to the same media, the businessman sees an opportunity in a sector “disadvantaged for a long time due to its volatility and its effects on the climate.”
For example, earlier this month, the company agreed to spend just over 3,300 million dollars (2,989 million euros at the exchange), to increase its participation in a liquefied natural gas export terminal in the US state of Maryland. It also increased its stake in Occidental Petroleum Corp. by 15% and decided to acquire more shares in five Japanese commodity traders.
Separately, Berkshire’s energy division is pushing to launch a bill that would see Texas spend at least $9.057 billion on natural gas power plants to support its strategy. “People are missing out on the economy that Buffett and Munger are looking at,” says Cole Smead, chief executive of Smead Capital Management: “Returns on equity in coal, oil and gas are off the charts compared to other sectors. And with ESG, you can buy them cheaper than you otherwise would.”
For example, Bloomberg has collected data on the energy profits and profits that Berkshire Hathaway has achieved in recent years and reflects an increase in its energy profits. In 2022 they increased to almost 4,000 million dollars (3,623 million euros), almost doubling the results obtained in 2007 and 2009 and in the last five years. In 2021 it touched 3,500 million dollars, and in 2020, the middle of the coronavirus pandemic year, it barely exceeded 3,000 million dollars in energy gains.
Despite refusing to lower its consumption in these fuels, the bet of the ‘Oracle of Ohama’ is not without nuances. Berkshire remains one of Chevron’s largest shareholders, but it reduced its stake by 21% in the first quarter. Buffett also invested 9.057 billion euros to help Occidental beat Chevron in a “bidding war” for Anadarko Petroleum Corp. in 2019, and the company now owns a “megaarea” in the world’s largest and lowest-cost oil field.
At this year’s annual meeting, Buffett emphasized how shale gas differs from conventional crude sources in Russia and the Middle East. The former’s wells, which make up the bulk of U.S. production, can be activated quickly and have a short lifespan, making operators more flexible to respond to oil demand and prices. “In the United States, we’re lucky to have the ability to produce the kind of oil we get from ‘shale,’ but it’s not a long-term source as you might think from watching movies,” he said.
Buffett also said that “both extremes” in the climate debate have become “ridiculous” in their arguments and that he doesn’t believe “it’s un-American to produce oil.” Despite this, regulation and investors continue to put pressure on the tycoon to follow a greener path. For several years now, platforms such as Climate Action 100+, or the Institutional Investors Group on Climate Change (IIGCC), have come forward to ask for greater commitment to net zero, without giving up to get a yes from the Oracle.
