Warren Buffett wants steady, reliable profits. He stands to do handsomely in the short term, given the current price of oil and recent trends. However, in the long run (say 10-20 years), oil prices will crater as the countries of the world makes their halting way through their transition to renewable energy sources that don’t spew emissions that heat the Earth. Buffett surely knows this, but must be betting that he can get out before the oil market crashes. I suspect he’ll have more trouble selling 136 million shares of Occidental than he did buying them. As demand and financing for production slips, and public oppobrium grows, oil firms will have trouble maintaining the cash flow that sustains the dividends that attract investors to buy and hold their shares. Without their accustomed reliable fat dividends, some will reluctantly decide to part with their investments in oil, enough to depress prices and market sentiment. Without the confidence of confidence not market analysts and individual investors, in the long run, big oil will tank. Buffett or his successor had better have a good sense of timing when he liquidates his massive holding of Occidental shares. His sales will by themselves trigger a decline in the market for all oil shares. That decline could easily mushroom, initiating a collapse that finally loosens Big Oil’s stranglehold on the world’s energy markets.
More than one money manager on Wall Street would love to see Buffett stumble. And many climate activists will rage against Buffett for putting profit before the Earth’s livability.
Warren Buffett is a very savvy investor, and a very, very wealthy one. Suppose he bought all that Occidental stock to tank the market for all oil stocks, figuring that for him $7billion is little more than pocket change (he wouldn’t lose that much). Maybe, just maybe, Warren Buffett is a climate activist after all.