Berkshire Hathaway, led by Warren Buffett, plans to spend $10 billion acquiring Occidental Petroleum’s chemical business—Buffett is already Occidental’s largest shareholder. Why acquire its business separately?

Buffett first entered Occidental Petroleum in 2019, providing $10 billion in financing to help the company complete its acquisition of Anadarko Petroleum. Thereafter, Berkshire began purchasing Occidental’s common stock in small increments. As the Russia-Ukraine conflict drove oil prices higher, Berkshire accelerated its purchases between 2022 and 2023. At the time, I wrote an article questioning Buffett’s decision to buy Occidental near the peak of oil prices—regardless of how strong Occidental’s fundamentals were, it was at least not a good entry price. When U.S. crude hit $120 per barrel, I believed the conflict-driven surge was unsustainable and that oil prices had already peaked. Subsequently, global oil prices halved, leaving Buffett with unrealized losses on Occidental—and causing him to miss out on the broader U.S. bull market. In stark contrast, the current U.S. equity rally, launched on October 12, 2022, has now lasted 33 months, with the S&P 500 rising 69% cumulatively. As of June 30, 2025, Berkshire holds approximately 265 million shares of Occidental’s common stock—valued at $11.71 billion at current prices, representing 3.9% of Berkshire’s investment portfolio and ranking as its seventh-largest holding. In addition, Berkshire holds about $8.5 billion worth of Occidental’s preferred stock, plus warrants exercisable at $59.58 per share. It’s worth noting that Buffett is currently net selling U.S. equities—having recorded ten consecutive quarters of net stock sales. As of end-June this year, Berkshire’s cash and U.S. Treasury holdings reached a record $344 billion. Occidental is the sole exception: not only has Buffett refrained from selling, but he has doubled down—buying more as the stock fell—not just the company’s shares, but essentially *everything* related to it.

Buffett’s and Munger’s responses at the annual meeting regarding their purchase of Occidental Petroleum

Buffett: We greatly admire Occidental’s oil-producing assets—and we also deeply respect Vicki Hollub’s leadership. If someone could develop another breakthrough technology, even more oil remains underground waiting to be extracted. All we need is another ‘magic’ solution. That said, Occidental possesses other advantages—but oil prices still play a decisive role in short-term petroleum economics. That’s unquestionable. By the way, we do not seek control of Occidental; it already has excellent management in place. We ourselves know nothing about oil operations—and Charlie doesn’t mind learning every detail about petroleum. Munger: Buying coal is like seeking cancer—you can’t even borrow money to expand a coal mine. Coal has truly become deeply unpopular. Buffett: Yes. Frankly, we believe extreme positions on either side are absurd—especially given how politically correct environmentalism in the U.S. has rendered oil exploration and use ‘morally wrong.’ I mean, this really is… a matter of physics—not political stance. Energy is critically important, yet it’s been politicized. This merely creates opportunities for agitators, fundraisers, consulting firms, and all visible actors. We’ll make rational decisions—and we believe producing oil does not violate the American spirit. Munger: In terms of prospects, no U.S. oil field rivals the Permian Basin. Buffett: Yes—we’re fortunate. Only in recent years have we learned where future producible oil lies. Munger: It’s nearly exhausted—though people long knew shale oil existed there, they believed it would never be economically recoverable. Buffett: My second or third stock purchase was Texas Pacific Land Trust, which owns three million acres there—earning only about $10,000 annually from ranching. In reality, it sits atop vast oil reserves; today, the company is effectively part of Chevron. It survived Texaco and many other transitions—and remains Texas Pacific Land Trust, though much of its land is leased, and its mineral rights belong to Chevron—a distinct advantage. This topic is fascinating—I’ll say this plainly: we won’t pursue control of Occidental, but we truly love the shares we own. We may buy more—or not—but we do hold long-dated warrants from the original deal, allowing us to purchase large quantities of stock at roughly $59 per share. These bonds have very long maturities, and I’m delighted we hold them. Next question. Author’s summary: Buffett and Munger believe America’s future oil supply will come primarily from shale oil—and the Permian Basin is the dominant shale-producing region. Occidental and Chevron collectively hold the majority of Permian acreage, making them central to America’s future oil production. This implies the U.S. may rely chiefly on the ‘Permian duopoly’—Chevron and Occidental. Holding both companies thus offers exposure to stable, long-term cash flows tied to America’s future oil consumption. Second, Buffett and Munger contend that oil is not a ‘sinful’ resource. Excessive political correctness around environmentalism in the U.S. has demonized oil to such an extent that most people grow overly pessimistic about its outlook.

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