One of Warren Buffett’s last investments isn’t doing so hot. How will that affect Berkshire?

Warren Buffett thought he found another cash machine when he loaded up on Occidental Petroleum stock in 2022. Berkshire Hathaway went in deep, collecting enough shares to own 28% of the oil company. That made Berkshire Occidental’s largest shareholder.

But oil prices in the U.S. are now slipping below $60 a barrel, and Occidental’s stock has plunged to its lowest level in over three years. Most of Warren’s buys were priced at over $50 a share. The stock closed at $39 on Friday.

The value of Berkshire’s position has dropped by about $6.4 billion since its peak last year, based on FactSet data. The whole thing is now testing how far Warren’s conviction will go—and how long his company is willing to sit on a bleeding investment.

Greg Abel has to decide what to do with the falling stock

According to The Wall Street Journal, investors are watching Greg Abel, the man Warren picked to take over. No one really expects him to dump the stock completely. Berkshire doesn’t usually act fast under pressure. But questions are building: does Greg reduce the position, wait for a rebound, or buy the rest of the company outright while the price is low?

Cole Smead, CEO at Smead Capital Management, which owns stock in both Berkshire and Occidental, said, “He looks foolish now. But I don’t think he’s going to be wrong.” Cole believes the company still has strong drilling prospects, and lots of oil left to pull from the ground.

Vicki Hollub, Occidental’s CEO, hasn’t seen any change in Berkshire’s behavior yet. She still makes trips to Omaha with her team to talk shop. She said Warren doesn’t try to run the company, but he likes to hear how the business works. “He will say things like, ‘You know, I may not get this and probably won’t understand it, but I want to talk about it, hear about it,’” she told the Journal.

Occidental said on Wednesday it plans to cut spending this year by around 3%, crediting better efficiency. A day later, its stock jumped 6.2%. Still, the mood around the investment has changed.

Warren used to bring up Occidental during every Berkshire annual meeting. This year, at what was his last one as CEO, he didn’t say a word about it. Vicki was sitting in the crowd.

Debt, oil prices, and clean-energy cuts are all closing in

This isn’t Warren’s first stint with oil. In 2008, he poured billions into ConocoPhillips—then the financial crisis hit, and oil tanked. He later invested in Exxon Mobil but bailed in 2014. He came back during the pandemic, buying a 7% stake in Chevron and around 10% of Occidental—and then kept buying more.

He already knew Occidental well. In 2019, during a fight with Chevron over who would buy Anadarko Petroleum, Vicki cut a deal with Warren: $10 billion in preferred stock paying 8% in annual dividends—that’s $800 million every year. Warren said he liked how Vicki laid out her strategy to analysts: “What Vicki Hollub was saying made nothing but sense.”

But since then, things have gotten messy. Vicki went all in on carbon capture even though the tech is still unproven. Warren didn’t object. Occidental later dropped $11 billion on CrownRock, a Permian driller. That deal added to the company’s debt, which now stands at $24 billion.

Now, oil demand is expected to take a hit. President Trump’s tariffs are raising fears of a global slowdown. Meanwhile, OPEC and its partners are pumping more oil, adding to supply and dragging prices even lower.

And there’s another threat. The Energy Department is preparing major cuts to clean-energy funding. That could block nearly $10 billion in support for projects like Occidental’s carbon capture facility in South Texas.

Even with all that pressure, some investors aren’t walking away. They say Occidental has something other drillers don’t: inventory. The company’s recent acquisitions have built up its well supply while competitors are running dry. That could help it bounce back if prices rise. “They just have a lot of oil to go out and produce for a very long time,” said Cole.

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