Warren Buffett built most of his vast fortune through shrewd value investing, following with great discipline the careful strategy of the great Benjamin Graham. But as has been pointed out by our commenters on various posts about the Keystone pipeline controversy, in the absence of Keystone or other new pipelines, Canadian oil as well as booming production from North Dakota has to be shipped by rail. And rail accidents are more prevalent than pipeline accidents. And guess who’s one of the largest railroad owners in the U.S. right now? Mr. Buffett, take a bow.
And guess who just managed to assure that the federal government won’t be developing any new heightened safety regulations for rail shipment of oil? This, from today’s Wall Street Journal editorial page morning report:
Research shop Capital Alpha Partners reports that “oil & gas and railroad industries are reportedly close to a deal with the U.S. Department of Transportation on new operational standards. That likely means any mandate on retrofitting rail tank cars is years away.”
Capital Alpha adds that the “Obama administration has never been shy about new regulations carrying a significant economic cost. Indeed, a major theme of the administration has been the goal of increasing standards—safety, health, environmental—as far as the political consensus will permit. However, even they seem less than eager to to inflict the potential increase on energy prices that a major new safety mandate on rail tank cars could trigger.”
The upshot is that while the Keystone XL pipeline project still isn’t allowed to proceed, the other infrastructure for transporting oil—railroads—will avoid costly new regulations, at least for now. We’re all for avoiding costly new regulations. And in this case the uncharacteristic Beltway restraint is particularly helpful to President Obama’s pal Warren Buffett. The billionaire’s holding company Berkshire Hathaway owns a large railroad.