Buffett's "final gamble" fails? Occidental Petroleum's stock price falls to a three-year low, Berkshire Hathaway loses $6.4 billion

Warren Buffett's gamble on Occidental Petroleum seems to be turning into an expensive mistake.

Since 2022, Berkshire Hathaway has held a 28% stake in Occidental Petroleum, becoming its largest shareholder.

However, as U.S. oil prices fell below $60 per barrel, Occidental Petroleum's stock price dropped to its lowest point in over three years last month. As of Wednesday's close, its stock price was only $39. According to FactSet data, Berkshire's investment in Occidental Petroleum has decreased in value by about $6.4 billion from last year's peak.

Buffett's "Last" Bet: Occidental Petroleum in Trouble

Buffett's investment in Occidental Petroleum was once seen as an endorsement of its CEO Vicki Hollub and temporarily boosted the company's reputation.

However, the reality is quite harsh. According to FactSet data, Occidental's stock price has fallen to a three-year low, and Berkshire's holding value has shrunk by about $6.4 billion from last year's peak. This undoubtedly raises alarm bells for investors who have followed Buffett's lead.

With oil prices remaining low, investors and analysts are focusing on a key question: how will Buffett's successor Greg Abel handle this investment? Will he sell some shares, take advantage of low prices to increase holdings, or simply go for a full acquisition?

While the market generally believes that Berkshire will not easily liquidate its position, as the company is a patient investor that can withstand market downturns, how long this test will last and how much it will impact Berkshire's overall portfolio remains uncertain.

Cole Smead, CEO and portfolio manager of Smead Capital Management, who holds shares in both Berkshire and Occidental, commented:

"He (Buffett) looks foolish now, but I don't think he is wrong."

Future Challenges: Dual Pressure from Macroeconomics and Industry Outlook

Although Buffett has publicly expressed confidence in his investment in Occidental Petroleum, he did not mention the company at the recent Berkshire shareholder meeting. This suggests that Buffett's enthusiasm may have waned.

Looking back at history, Buffett's investments in the oil sector have not always been successful. He heavily invested in ConocoPhillips in 2008 but faced a global economic recession and a crash in oil prices. Subsequently, Berkshire invested multiple times in ExxonMobil but sold all its shares when oil prices fell in 2014.

Occidental Petroleum is currently facing new challenges. Many economists expect that Trump's tariffs will trigger a global economic slowdown, thereby reducing demand for oil. At the same time, the Organization of the Petroleum Exporting Countries (OPEC) and its allies have decided to increase production, further putting pressure on oil prices. David Deckelbaum, an analyst at TD Cowen investment bank, pointed out that lower oil prices will make it more difficult for Occidental Petroleum to reduce its debt levels, which are relatively high compared to its peers In addition, one area where Occidental Petroleum faces potential adverse factors is its low-carbon business, which includes its direct air capture projects. The Wall Street Journal reported on the 8th that the U.S. Department of Energy may significantly cut federal funding for clean energy projects, including the carbon capture project in South Texas in collaboration with Occidental Petroleum, which could further impact the company's future development