Warren Buffet’s Invested $1 Billion in Oil During the Slump, Why?

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Despite the huge price decline in oil, Warren Buffet’s firm Berkshire Hathaway has spent up to $1 billion in Phillip 66’s stock.

Buffett is notorious for buying stocks in a down market though he is not a big oil investor. According to share tracker LionShare, Phillips 66 is the only oil company in his top 50 holdings and is Berkshire’s sixth largest holding.

Investing in this sector might seem like an unwise decision during a time when oil prices are steadily falling. However, because Phillips 66 is an oil refining company, it can profit from falling oil prices by buying the crude it refines.

Additionally, it also benefits from the fact that the price of gas has not fallen as much as the price of oil has. Phillips’ refining profits rose from $1.6 billion to $2.6 billion in 2014.

“People don’t notice it because the price at the pump has come down so much, but gasoline prices are quite high relative to crude,” said Tom Kloza, chief oil analyst for the Oil Price Information Service.

Buffet has owned a stake in the company since he bought ConocoPhillips shares back in 2006. Since then, Berkshire has shed shares of ConocoPhillips, but it’s been consistently adding shares of Phillips 66 currently up to 14% of the company’s shares.

Article written by HEI contributor Aliyah Cole.

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