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Warren Buffett has been on a buying spree, snapping up shares of Occidental Petroleum like it's going out of style. But why is one of the world’s legendary investors betting on oil when everyone else seems to be yapping about renewable energy?
The Permian Basin Play
First off, let's talk geography. Occidental Petroleum is a major player in the Permian Basin, one of the richest oil fields in the US, and guess what? Buffett loves a good, reliable cash flow! The Permian Basin's oil production is like a pot of gold.
Did you know that the Permian Basin is the largest and most productive in the world? To put it in perspective, the Permian Basin produces more oil than entire countries.
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Permian Production: As of 2023, the Permian Basin cranks out around 6.1 million barrels of oil per day. Compare that to Saudi Arabia’s Ghawar field, which is the largest oil field globally, producing about 3.8 million barrels per day.
ALSO, the reserves in the Permian are huge. Estimates suggest that the Permian holds about 60 to 70 billion barrels of resources. That’s a lot of oil, and I can already hear the eagles flying in 🦅🦅🦅
Buffett’s Big Bet on Black Gold
So, we've established that the Permian Basin is an oil powerhouse. Now, I want to talk about the man of the hour—Warren Buffett. Why is he so obsessed with Occidental Petroleum?
First off, Buffett isn't known for throwing his money around without good reason. When he sees an opportunity, he goes in, and that's what he's doing with Occidental. In 2024 alone, Berkshire Hathaway bought over $246 million in stock.
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Buffett’s Buying Spree: Berkshire Hathaway now owns a $14 billion stake in Occidental Petroleum, making up roughly 26% of Occidental's market cap.
But why Occidental, and why now? Well, it’s not just about the Permian Basin’s current production. It’s about the future. Occidental’s acquisition of CrownRock, a major player in the Permian, positions them to capitalize on one of the richest oil reserves in the world.
Future Supply Shortages
Occidental’s CEO recently forecasted a potential oil supply shortage by the end of 2025. With demand expected to outpace supply, oil prices could soar, making investments in oil companies like Occidental incredibly lucrative, which is probably what intrigued Buffett.
Of course, no investment is without risk. The energy sector is volatile, with prices subject to geopolitical, regulatory, and market changes. And the ever-looming shift towards renewable energy... But here’s the thing—Buffett is all about calculated risks. He’s betting on the continued relevance of oil, at least for the foreseeable future, and he’s betting big.
For extra stats on the Permian Basin, read this infographic 👇