The proliferation of renewable energy sources like solar and wind isn't happening quite as quickly as initially expected, postponing the point in time where the world's consumption of crude oil and natural gas stops finally stops growing and starts shrinking.
That's the overall take from investment bank Goldman Sachs' analysts, anyway. In a recent research report, they suggested that the planet's daily consumption of oil will likely grow from last year's average of 103.5 million barrels per day to 113 million in 2040, driven by a combination of growing demand for jet fuel, AI data centers' soaring need for power, and slower-than-anticipated uptake of electric vehicles. This outlook adds five years to Goldman Sachs' previous belief that the world would reach "peak oil" in 2035.
This shift has implications for all stocks within the energy sector, and plenty of stocks outside of it. It's Warren Buffett's Berkshire Hathaway (BRK.A +0.09%) (BRK.B +0.48%), however, that's arguably positioned to experience the most unexpected benefit of crude oil's now-lengthened lifespan.
Too much agreement to simply dismiss
Were it just Goldman Sachs, the report might be dismissible. Even the investment bank itself acknowledges that its view is markedly "above consensus."
It's not just Goldman Sachs, though. The International Energy Agency also recently moved its expectation for the planet's peak-oil pivot all the way up to 2050. This aligns with oil giant ExxonMobil's outlook citing the 25% increase in electricity production the world will likely need between now and then. Indeed, even in the most optimistic of scenarios, ExxonMobil says oil and natural gas are still likely to be the planet's single biggest sources of power 25 years from now. And we'll still need lots of crude past that point as the world continues to wean itself from fossil fuels.
Pro-oil OPEC, of course, has never not been bullish on crude for the long haul. In July, it reiterated that it believes demand for oil will grow indefinitely into the distant future.
Image source: Getty Images.
This all obviously bodes well for energy stocks. Investing in oil and gas names, however, can be a bit more "adventurous" than most investors may be willing to accept. These stocks tend to ebb and flow on a daily basis with crude prices themselves, yet are also affected by an ever-changing supply and demand dynamic regardless of the commodity's price. It might make sense to curb some of these names' inherently unpredictable volatility.
It's Berkshire Hathaway, of all things, that just might do the trick.
The Berkshire you know, and the one you don't
Berkshire remains a most curious enigma. It's one part mutual fund and one part private-equity fund, supporting -- yet also somehow supported by -- an insurance operation with a reliable and largely unrestricted cash flow.
It's also a surprisingly effective way of tapping into oil's bright future without the usual stress of owning direct exposure to the sector.
The most obvious way it does so is with its stakes in individual oil and gas stocks Occidental Petroleum (OXY +0.56%) and Chevron (CVX 0.24%). As of the latest look, Berkshire owns 265 million shares of the former (more than $11 billion worth), and 122 million shares of the latter (worth nearly $19 billion). Combined, they account for roughly 10% of the conglomerate's entire portfolio of publicly traded stocks.
NYSE: XOM
Key Data Points
Then there are the related holdings that you may not realize are part of the Berkshire family because they're small subsidiaries of wholly owned Berkshire Hathaway Energy. These include natural gas pipeline outfits Kern River, Northern Natural Gas, and BHE GT&S. There's also pipeline-optimization outfit LiquidPower Specialty Products Inc. (or LSPI), motor oil and automotive additive brand Lubrizol, and Pilot Travel Centers, each of which also benefits in its own way from continued demand for oil and gas.
The company's regular reporting doesn't provide a great deal of detail as to how these units perform. Berkshire Hathaway does, however, confirm that its gas pipelines and its non-utility energy businesses each reliably add more than $1 billion to the conglomerate's annual operating income, or about 5% of its GAAP bottom line. That's not insignificant, particularly when added to the conglomerate's sizable positions in conventional energy stocks.
More to the point for interested investors, Berkshire is a clever way of taking on a fair amount of exposure to the energy sector without also taking on its volatility and unpredictability.
An easy, backdoor way to invest in the energy sector
It's obviously not the only way to plug into the sector's future, which is suddenly more promising than it was just a few days ago. An energy-focused ETF like the Energy Select Sector SPDR Fund (XLE +0.63%) or the Vanguard Energy ETF (VDE +0.58%) will do the trick nicely as well.
It's also worth mentioning that while Goldman Sachs expects usage of oil to continue growing through 2040, that doesn't mean prices will necessarily follow. Goldman Sachs believes that WTI crude prices will actually slip to an average of $53 per barrel next year, down from a little over $60 right now, thanks to a swell of new supply that will reach the market in the meantime. Lower crude prices make drilling oil and refining it less profitable.
They don't make it unprofitable though, and oil and gas prices have very little effect on the profitability of Berkshire's wholly owned pipelines and its oil-related brands and services.
Bottom line? If Goldman Sachs' outlook has you looking for an easy way to scoop up more exposure to the energy sector, Berkshire Hathaway is a surprising and easy-to-own way of doing it.
