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Warren Buffett is a personal hero of mine. And I mean that in both life and money. But we’re here to talk about money, right?

Buffett has posted a 20% compound annual rate of return over the course of more than 50 years. And he’s built up a $100+ billion personal fortune in the process.

To say he’s been incredibly successful is underselling it. He’s arguably the GOAT of investors. And so when Buffett makes a move, the world pays attention.

Well, Buffett has been making big moves recently. He’s been betting billions of dollars on one particular area of the market.

Today, I want to tell you about the stocks in one area of the market that Buffett has recently been loading up on. Ready? Let’s dig in.

The big bet Warren Buffett is making comes down to one word.

That word? Oil. 

Sure. We can expand on it – oil & gas, energy, etc. But it’s clear that Buffett believes the price of oil is headed higher. And not just a little higher for a few months. Meaningfully higher, for an extended period of time.

It’s certainly an easy bet to make right now.

After all, oil went to negative pricing for the first time in history during 2020 after the pandemic caused all kinds of distortions in various aspects of the market and society at large. A barrel of oil was literally worth less than $0 for a temporary period of time about two years ago. Now? WTI crude is over $110/barrel. Oil pricing has explosively gone parabolic. We’re near multiyear highs here.

A variety of circumstances, including self-inflicted injuries, have heaped this upon society.
 
I can tell you that I’ve been invested in the energy space personally for more than a decade now. And I’ve witnessed a lot of vitriol being thrown the way of the traditional energy complex.

Companies across oil & gas have been villainized. Deserved? Maybe. Maybe not. Either way, it’s been politicized to the point of real-world consequences, including capital outflows and underinvestment in traditional energy supply in favor of renewables.

Management teams at major energy companies have heard the criticism loud and clear.

They have really clamped down of late, becoming far more efficient and focused with capital. Because of uncertainty regarding the ROI of projects that are both large in scope and long in duration, capital expenditures have come down over the last decade at many of the supermajors – despite the world growing larger and, arguably, needing more traditional energy supply.

This leads to a constraint in oil & gas supply.

That’s coincided with demand suddenly spiking from a post-pandemic reopening of the global economy. Adding in the war between Russia and Ukraine only exacerbates the structural imbalance, as Russia has historically been a major supplier to the world’s energy market.

Society got religion. A lot of people suddenly remembered that the world still largely runs on oil & gas.

And now the political and market posturing has become, shall we say, less hostile toward traditional energy companies. But what does this have to do with Buffett and oil pricing? Well, quite a bit. See, the problems that have led to high pricing in oil are deep-seated and unlikely to be rectified quickly. You can’t just suddenly flood the market with supply that doesn’t exist.

Buffett likely sees three massive advantages that traditional energy companies have right now. 

Video Length: 00:09:52