The secretive trip that became common knowledge this week, where Warren Buffett and Bill Gates took a look at Canadian Natural's C$9.3 billion ($8.9 billion) Horizon oil sands mining and synthetic crude processing operation, touring the facility which is scheduled to begin production later in 2008, resulted in speculators bidding up the oil sands producers' share prices.
Buffett has sinced cooled the stocks and speculators down, saying in an interview on CNBC that he has no plans at this time to buy into the sector.
"No, no. I go to the movies, but I don't buy movie companies. I mean, I'm always interested in understanding the math of things and understanding as much as I can about all aspects of business," he said on CNBC's Squawk Box.
Buffett usually does things quietly so this very thing doesn't happen. Obviously somebody on the inside let it out the duo were touring the operations so that rumors would bid up the oil stocks on the Toronto Stock Exchange.
Even so, Buffett added that the fact-finding tour may be something useful in the future, but said it's the ability to make long-term price forecasts for oil that will determine if it's profitable to invest in the commodity. Buffett also said if oil stayed at about $120 a barrel over the next 50 years, the tar sands would do very well, but he concluded he doesn't have the answer to that uncertainty.
Part of the difficulty in projecting profits is the higher operational cost connected to the thicker crude inherent in the sands. If oil prices plummeted, and new oil resources tapped (like the billions of barrels available in America), it could end up a poor investment, as thinner crude would be less expensive to access and produce.
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