Financier Made $1 Billion Bet on Oil During BP Spill


Photo credit: NASA Godard Institute of Space Studies

The billionaire financier Carl Icahn snapped up $929 million worth of shares in oil-related energy companies in the months following the explosion at the Deepwater Horizon site, new reports are revealing. Icahn made the nearly $1 billion bet as shares in the industry were falling to all-time lows, and it's thought that this investment helped the energy sector rebound in July. But what I want to focus on is the nature of Icahn's bet: His $1 billion bet was based on a conviction that the effected oil and gas companies would rebound and continue to thrive. So let's just consider that for a second: In the wake of the worst oil spill in US history, a wealthy financier made a billion dollar bet on oil. He intuited that not even the historic catastrophe would be enough to reshape US energy policy in any meaningful way, and that it wouldn't be long before oil was back on top -- and he was right.

Here's Bloomberg:

Icahn plowed about $929 million into energy stocks in the period, bringing the total to 18 percent of the hedge-fund group's stock investments, according to a regulatory filing last week. The energy bet helped the funds record an 8 percent gain in July, when oil stocks rebounded, Icahn's holding company said in an Aug. 4 statement.

Icahn, who has a 30-year history of investing in energy companies when they trade at a discount to the value of their oil and gas reserves, bought the stakes as the April 20 explosion of BP Plc's Macondo well pushed prices lower. The Standard & Poor's index of major oil and gas exploration companies declined 12 percent during the second quarter. It has since rebounded 10 percent.

The Senate, as we know, failed to tackle energy reform, despite the fact that the House passed a comprehensive bill reigning in carbon emissions and curbing oil dependence last year. And so, no new national policy will change the status quo which of course includes dependence on oil that's demonstrably dangerous to obtain.

But it's not like the American people mobilized and voiced their outrage, either (as sort of happened with financial reform). And I've noted before how the spill hasn't even united environmentalists or activists -- for the most part, it's left us in a confused malaise. And Icahn's bet reflects that investors are still convinced that oil's not going anywhere for a long time. It's a twisted world where efforts to obtain a particular substance resulted in the death of 11 people, devastated a regional economy, and did massive damage to fragile ecosystems -- and then sparked further investment in those very efforts. But that's the world we live in, and maybe it's time to start getting mad about it.

More on BP Gulf Spill
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