When Warren Buffett was asked to explain in April why Berkshire Hathaway, his investment firm, had built a 14% stake in Occidental Petroleum, or Oxy, over a frenetic fortnight of buying starting two months earlier, his answer was long. It included a digression into John Maynard Keynes’s “General Theory” of 1936, and a rollicking description of why Wall Street still resembles a gambling parlour, as it did back then. He barely mentioned the Houston-based oil company, now worth $69bn, besides saying that he had read Oxy’s annual report for 2021 and that Vicki Hollub, its boss, “made nothing but sense”. The pithiest explanation came from Charlie Munger, Mr Buffett’s long-standing sidekick: “We found some things we preferred owning to treasury bills.”
It hardly sounded like a resounding endorsement. Yet Berkshire’s stake has since climbed above 20%, making it Oxy’s biggest shareholder by far, and on August 19th it got authorisation from an energy regulator to purchase up to half of the firm’s shares. The buying spree has made Oxy the highest climber this year in the s&p 500, one of America’s stockmarket benchmarks. It has also fuelled speculation that it is the prelude to a takeover.
A tailwind is whipping up. America’s newly approved Inflation Reduction Act substantially increases dac tax credits (though per tonne of CO2 sequestered it remains eye-wateringly expensive). If costs come down, the recent stampede by companies to commit to net-zero targets is likely to create “incredible demand” for carbon sequestration, including dac, says Michael Greenstone, a professor of economics at the University of Chicago. “Everyone wants a guaranteed way of removing tonnes of CO2.”