As oil prices go, so goes Occidental Petroleum's (OXY 1.51%) share price. And both are going down.

Oil prices have fallen in large part because of slower demand from China. As a result, Occidental stock is now close to 14% below its high set earlier this year while the overall stock market has risen.

Is Occidental in trouble? Warren Buffett doesn't think so.

Buying on the dip

Buffett added regularly to Berkshire Hathaway's (BRK.A 0.74%) (BRK.B 0.97%) position in Occidental Petroleum throughout 2022. He did so even as the oil stock soared 117%.

He continued to buy Occidental in 2023. So far this year, though, the legendary investor has been able to buy on the dip.

In the first quarter, Buffett increased Berkshire's position in Occidental by over 8.9%. But he still wasn't done. In May, Berkshire scooped up even more shares.

Occidental now ranks as the sixth-largest holding in Berkshire's portfolio. Buffett's company owns nearly 25% of the oil producer. It holds larger stakes in only two other companies -- Davita and Kraft Heinz. 

What's Buffett thinking?

Buffett clearly isn't worried about lower oil prices causing problems for Occidental. He isn't concerned that renewable energy sources will replace fossil fuels anytime soon, either.

In a lengthy interview with CNBC in April, Buffett predicted that the world will produce more oil in five years than it does now. He said that even if trillions of dollars were spent to move away from fossil fuels, they'd still be needed. Buffett added, "You can't change the world that fast." 

Buffett has often emphasized the importance of strong management teams in his decisions on whether or not to invest in a company. He's a big fan of Occidental Petroleum CEO Vicki Hollub. Buffett told CNBC's Joe Kernen that Hollumb is "extremely competent." He likes that she "understands oil" and "understands political realities." 

Some might question Hollub's focus on building carbon capture solutions. Not Buffett. He supports Occidental's efforts to expand into carbon capture and sequestration. 

Occidental plans to launch 70 direct air capture facilities by 2035. These facilities suck carbon dioxide directly out of the air. And they could give the company a significant new growth market. 

Last, but not least, Buffett likes Occidental's valuation. Despite the huge gains last year, the stock still only trades at below 9.8 times forward earnings. 

Double, not trouble

What's the most compelling signal that Buffett doesn't think Occidental is in trouble? In August 2022, Berkshire maneuvered to win regulatory support to acquire up to 50% of the oil company. That's roughly double Berkshire's current stake in Occidental.

Buffett stated in Berkshire Hathaway's shareholder meeting in May that he wouldn't attempt to gain control of Occidental. He told shareholders, "We wouldn't know what to do with it." 

However, the Oracle of Omaha stated, "We love the shares we have." He said, "We may or may not own more in the future." 

It's a pretty good bet that Berkshire will add to its position in Occidental. Buffett noted in the shareholder meeting that the conglomerate's original deal with Occidental gave it warrants to buy "a very substantial amount of stock [at] around $59 a share." He added, "[W]arrants last a long time, and I'm glad we have them."

Occidental stock currently trades at a little under $58 per share. Even a small move higher would allow Berkshire to buy more of the oil company at a discount.