Inside today’s Daily Journal…

Editor’s note: On May 16, 2025, Porter released The Better Than Berkshire Index, designed to show Complete Investor subscribers that they can outperform Warren Buffett’s Berkshire Hathaway. Starting with Monday’s Daily Journal and over the next two weeks, using the insights he has learned from Buffett himself over the decades, Porter will explain exactly what’s gone wrong with Berkshire and how investors can build a portfolio that can do better…

The Berkshire Hathaway annual shareholders meeting is this weekend.

And since no one at the meeting is going to ask any intelligent questions (everyone is there to slurp Warren Buffett in public), I thought I’d offer you more insight into what journalists and shareholders should be asking The Chairman.

On Monday, I shared some insights into how badly Berkshire’s core insurance business (GEICO) was performing compared to its peers (Progressive). But today (and tomorrow) I want to discuss a much bigger problem, a problem that could easily lead to total capital losses in excess of $100 billion – losses that, even for Berkshire, would threaten the financial stability of the entire enterprise.

The media never tells the truth about Buffett or the late Berkshire vice chair Charlie Munger. They are the only two people in finance who have a better reputation than squirrels. (Squirrels are just rats with good PR.) And here’s something every investor in Berkshire ought to know: Warren Buffett and Charlie Munger believed in Peak Oil.

In the early 2000s, the two main heads of Berkshire Hathaway believed that global crude oil production had peaked, or was about to peak, and that the long-run trajectory of oil prices was up and to the right indefinitely. They said so, on the record, in interviews and at shareholder meetings for at least a decade. Their largest oil-equity investment of the period – the $7 billion ConocoPhillips (COP) position acquired in 2008 – was made on this thesis, at the all-time-high oil price, and was disclosed by Buffett himself, the following February, as a major mistake.

Their Peak Oil conclusion was not a passing impression. It was their operating worldview, and it animated Berkshire Hathaway’s energy strategy from approximately 2000 through the middle of the following decade. In June 2008, with West Texas Intermediate crude trading near $140 per barrel, Buffett appeared on CNBC and was asked why oil prices were running so hot.

He answered:

That is the Peak Oil thesis stated in plain English. The world has found most of the oil it is ever going to find. Demand is climbing. Supply will not keep pace. Prices have to go up. Or so the theory goes.

Buffett bought ConocoPhillips on this thesis in the summer and fall of 2008. The peak position, disclosed in the 2008 annual letter, was 84.9 million shares acquired at a cost of approximately $7.0 billion – an average cost basis of around $80 per share. By the close of 2008, COP traded near $52, and the position was carried at $4.4 billion. The paper loss at the snapshot was $2.6 billion. The eventual realized loss, after Berkshire began unwinding the position in early 2009 to harvest tax-loss offsets against capital gains elsewhere in the portfolio, totaled at least $1.5 billion of cash money, plus the opportunity cost of the rest of the position never reaching its cost basis.

Buffett explained it in his 2008 letter:

Munger held the same views about Peak Oil and stated them even more bluntly.

At the 2009 Wesco Financial annual meeting – the small holding company that he ran inside the Berkshire family – he was asked about energy and the oil market and replied:

A few years later, at a conference of the Committee of 100, the U.S.-China relations forum, Munger delivered the speech that became the definitive Peak Oil document of his career. The audio was transcribed by Shane Parrish at Farnam Street and published in July 2013.

The relevant passages from Munger’s remarks:

By the time Munger gave that speech, American crude oil production had already begun the most dramatic expansion in 70 years.

The hydraulic-fracturing revolution in the Bakken, Eagle Ford, and Permian basins had been adding nearly 1 million barrels per day (b/d) of new supply every 12 months for several years running. The very phenomenon Munger said was certain not to occur – the appearance of substantial new hydrocarbon supply from a previously inaccessible source – was occurring – in real time, in his country, in volumes that were already visible in U.S. Energy Information Administration monthly statistics he or any analyst at Berkshire could have pulled in five minutes.

Munger didn’t care about these facts. His beliefs about Peak Oil were a crusade.

Four years after his Committee of 100 speech, at the February 2017 Daily Journal (DJC) annual meeting, after the Permian had already passed 5 million b/d, after the first U.S. liquefied natural gas (“LNG”) cargo had already left Sabine Pass, after the United States was about to become the largest crude-oil producer in the world for the first time since 1973, a shareholder asked him whether American natural-gas exploration and production was a good business.

He replied, on camera:

“I’m sure I’m right and the other 99% of the people are wrong.” That is, in 15 words, what was about to be Berkshire shareholders’ largest loss in the company’s history.

In 2008, the year Buffett bought ConocoPhillips at the top, the United States produced an annual average of 5 million barrels of crude oil per day. That was the lowest annual production figure since 1946.

The production trend line in the U.S. had been negative, on a multi-decade smoothed basis, for 36 years. Every government and private analyst then forecasting U.S. production assumed continued decline. Buffett’s comment about “sticking straws in the ground now since Titusville” was, on the data set he was looking at, defensible.

In 2025, the United States produced an annual average of 13.60 million barrels of crude oil per day. That is a new all-time annual record, set 17 years after the trough, representing growth of 172% from the level Buffett observed when he bought shares of ConocoPhillips.

Including natural-gas liquids, the U.S. total-liquids figure for 2025 approaches 20 million b/d. The country that was “running out of oil” in 2008 is, in 2026, the largest hydrocarbon producer in human history.

The single largest contributor to that turnaround is the Permian Basin in West Texas and southeastern New Mexico, an oil province that had been considered mature and substantially depleted as recently as 2010. Permian crude production, which was roughly 0.8 million b/d in 2010, was 6.6 million b/d in 2025. The Permian Basin alone now accounts for 48% of all U.S. crude oil production, and it accounted for 80% of the entire U.S. production growth in 2025.

The technology that unlocked the Permian was not, despite the popular framing, a single innovation. It was a sustained 20-year compounding of three engineering disciplines.

The combination of the three reduced the marginal cost of producing a barrel from a Permian tight-oil well from roughly $90 in 2010 to $61 in 2025.

Munger’s position was particularly confusing to me. I couldn’t understand why he’d believe things that were patently false and that had been proven false for years.

Meanwhile, Berkshire Hathaway Energy is the only Berkshire subsidiary whose capital-allocation strategy was explicitly premised on the worldview that the United States was running out of cheap, accessible hydrocarbons. The investment only makes sense if the country must fund, at utility-rate-based expense, a multi-decade build-out of wind, solar, and high-voltage transmission infrastructure to replace cheap, abundant, hydrocarbon energy.

I am virtually certain that there’s not a single Berkshire Hathaway shareholder who realizes how much Berkshire has at risk in these investments… Buffett has never made money in energy. And its track record is about to become meaningfully and materially worse.

In tomorrow’s Journal, I will detail Berkshire Hathaway’s energy investments and explain the extent of the potential damage to Berkshire and its shareholders.

Tell me what you think of today’s Journal: [email protected]

Good investing,

Porter Stansberry
Stevenson, Maryland

Click here to hear Shannon’s message

1. Big tech earnings on deck. Alphabet (GOOG), Amazon (AMZN), Meta (META), and Microsoft (MSFT) all report earnings after today’s market close, followed by Apple (AAPL) tomorrow. Each company, along with others like Nvidia (NVDA) and Micron (MU), are part of the basket of artificial intelligence (“AI”) stocks that now represent 41% of the S&P 500 index. The market has rarely been this concentrated on a single investment theme – as shown in the chart above.

2. The $3.4 trillion time bomb in the Treasury market. Hedge fund repo borrowing (short-term borrowing of shares) has hit a record $3.4 trillion – tripling since 2019 and up 154% since 2022. Total hedge fund leverage now stands at over $7 trillion – the highest in history, now owning 8% of the entire $31 trillion U.S. Treasury market. Any spike in repo rates, jump in yields, or geopolitical shock could force a cascading unwind.

3. Oil approaches a post-war high as Trump digs in. Brent crude oil traded above $116 per barrel this morning – less than $4 below its March 9 peak of $120 – after the Wall Street Journal reported that President Trump has instructed aides to prepare for a prolonged blockade of Iranian ports. Trump himself posted at 4 am ET, telling Iran to “get smart soon,” above an image of himself holding a rifle in front of bombs exploding, captioned “NO MORE MR. NICE GUY!”

Complete Investor recommendation Nvidia (NVDA) has reached a historic milestone – accounting for 4.96% of the MSCI All Country World Index, a weight that now officially eclipses the nation of Japan’s 4.94% share of the same index. Now, nearly five cents of every dollar entering global passive index funds is automatically allocated to Nvidia. Its valuation exceeds the annual GDP of several G7 nations. Shares are up 48% since we recommended them in June 2025.

Bill K. writes:

Wayne Y. writes:

Ricky W. writes:

Daniel G. writes:

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