The greatest investor of our time, and probably all time, is Warren Buffett. Over the past 58 years, the “Sage of Omaha” transformed Berkshire Hathaway from a group of textile plants into an international conglomerate whose stock has grown 3,787,464 percent in that period. So, it makes sense to pay attention to things Buffett invests in, and to understand why he is now pouring money into stocks for fossil fuels.
“In an about-face, Berkshire Hathaway has amassed a stake in two oil companies valued at $40 billion,” the Wall Street Journal reported this month. Buffett’s company is now the biggest shareholder in the oil giant Chevron and in Occidental Petroleum. “Energy shares made up about 14% of Berkshire’s stock portfolio at the end of 2022—the highest percentage going back to at least 2000.”
Buffett must see that the planet’s ongoing energy transition is the opportunity of a lifetime for fossil fuels. The entire world is looking to shift to a less carbon-intensive energy future. That means we often see wind turbines spinning on hillsides, or solar panels mounted on neighborhood homes. Renewable energy is important, and its use is expanding.
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However, the transition will take years to complete. Powering the planet through those years will require a multi-fuel approach. This is the same principle as a hybrid car that has a battery, but also has gas in the tank. If the battery runs down during a trip, the gasoline can keep the driver going. The planet will not be able to give up the proverbial gas tank (fossil fuels) until the battery system (renewables) is at least as reliable or even better.
The same thing is true for the overall energy transition. We can’t shut down all the natural gas-fired power plants, park all the internal combustion engine cars, and block off all the fossil fuel pipelines. Solar cells, dams, and wind turbines simply aren’t enough to power our modern lifestyle. The energy transition must be a transition to something better, not worse. Power is, has been, and must remain abundant, affordable, and reliable. It must also become cleaner, of course. But it can’t be cleaner at the expense of reliability, affordability, or abundance.
Buffett isn’t the only investor to see the opportunities in the diverse energy sector.
“Pipeline operator Oneok agreed Sunday to buy smaller rival Magellan Midstream Partners for about $14 billion, a deal that would form one of the biggest U.S. companies involved in transporting and storing energy,” the Journal reported. “Our expanded products platform will present further opportunities in our core businesses as well as enhance our ability to participate in the ongoing energy transformation,” Oneok Chief Executive Pierce Norton told the newspaper.
Oneok is embarking on what will be the right approach for investors, CEOs, and policymakers: deliver more energy today to build a brighter, cleaner energy future. A changing climate requires many types of innovation: technological innovation, business model innovation, and way of thinking innovation. Fossil fuel companies like Oneok are driving all of these. The transition is happening.
But while the overall picture is positive, the media isn’t delivering that message. In late 2021 coverage of climate change reached an all-time high, according to the Media and Climate Change Observatory. But news reports mostly paint a bleak picture. “The language of climate change is also changing, with more intense words and phrases being used in the news to describe the phenomenon, such as ‘climate catastrophe’ and ‘climate emergency,’ according to data collected by MeCCO and language learning platform Babbel from 2006 to 2021.”
Of course, it is easier to cover bad news than to cover good news. Reporters never mention a river when it is flowing normally, but flock to cover it if it spills over its banks. Still, all the talk of “emergency” and “catastrophe” is counterproductive. It ignores progress and frightens people instead of enlightening them.
The real story is that every energy transition has the potential to deliver more power more efficiently. Humans once chopped down and burned trees. That provided heat, but it released CO2 and denuded the landscape. We replaced wood with coal, which provided more energy, drove steam engines, and saved trees. After coal we added petroleum, natural gas, nuclear, and now renewables to the mix.
Each step has meant more energy is available for more uses, along with a cleaner environment overall. We have preserved habitats, protected animals, and created jobs while climbing the energy ladder. Let’s keep investing in a mix of energy sources, and we’ll find that the sky is the limit.