How Warren Buffett Made A Wrong Bet On Oil

Warren Buffett has taken some big bets in the oil and gas sector in the last few years. Apart from owning substantial stake in Exxon Mobil Corporation XOM and National-Oilwell Varco, Inc. NOV, Berkshire Hathaway Inc. (NYSE: BRK-B) is also indirectly exposed to fluctuation in oil price through privately owned The Lubrizol Corporation and BNSF Railway Company.

Bloomberg's Noah Buhayar recently discussed how the drop in oil prices have affected The Oracle Of Omaha's portfolio.

"One of the really interesting things to be said here is that Berkshire Hathaway's company has gotten so big that if you look across it, there are number of ways that it's going to be affected by these lower oil prices," Buhayar said.

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"He has got his railroad, BNSF, they've benefited hugely from the on-shore oil production in places like North Dakota and it's a real question if oil stays at this level, what that's going to do volumes on the railroad."

Buhayar continued, "About two years ago, maybe a little less, he bought about $3.7 billion worth of Exxon's stock. That's obviously been pretty challenged here in the last little stretch and there are a number of other ways that it has affected Berkshire."

The Financial Impact?

"When it comes down to dollars and cents, it's probably a little bit too early to say," Buhayar said. "We certainly know the financial impact when his stock picks go down because that's pretty transparent. It's a lot harder to tell what the impact is going to be on the railroad. We don't know yet what the volumes are going to be. Frankly, we don't have even greater transparency into BNSF's margins on those oil cars that they are shipping."