Announcer: This is a special edition of SQUAWK BOX live from the Holland Performing Arts Center in the heart of beautiful Omaha, Nebraska. Now, once again, here's Warren Buffett and Becky Quick.

QUICK: Welcome back, everybody, to this special edition of SQUAWK BOX. We've been talking all morning long with Warren Buffett of Omaha, Nebraska, since we're live in Omaha today. And, Warren, we've covered a range of topics, but there has been an awful lot of people who are interested in the trip you made this week. On Monday you headed up with Bill Gates and you got to take a look at the tar sands. What happened?

BUFFETT: Well, what happened was Bill and I talked some months ago about just how interesting the whole thing was from a geology standpoint and from the standpoint that that represents one of the few big upcoming sources of more oil production in the world, or very few. And we both thought we'd understand a little bit better if we went up and looked at it than simply by reading about it. So on Monday six of us, Bill and a few other fellows--the Kiewit company arranged it. They're--they've done a lot of construction up there. And we went up to northern Alberta and we saw a very big mining-type project. There are two ways that they recover oil from the tar sands. And then we went to this in situ project also, and we had some perfect people explain a lot about how it worked both from a economic standpoint and from a physical standpoint.

QUICK: Uh-huh. And was this something that you came up with, that Bill came up with, your friend, Walter Scott, from the Kiewit company? Who came up with the idea?

BUFFETT: Well, Walter Scott arranged it for us.

QUICK: Right.

BUFFETT: Walter's a whole lot smarter than I am about what goes on in mining and all of--anything to do with the real world. I'm good with numbers. And so he arranged the trip for us. But it was something that Bill and I cooked up by--a couple of months ago when we were talking about the tar sands. We said why don't we go up and take a look? And so we found a date when six of us could do it. Walter arranged the trip. We had some wonderful people up there in Alberta at both projects that explained how the things really work, the costs involved. And they just couldn't have been more helpful.

QUICK: OK. So having seen that, there's already been a lot of people who've been speculating that you must be interested in investing in this arena. Are you?

BUFFETT: No, no. I go to the movies, but I don't buy movie companies. I mean, I--I'm always interested in understanding the math of things and understanding as much as I can about all aspects of business. And what I learn today may be useful to me two years from now. I mean, if I understand the tar stands today and oil prices change or whatever may happen, I'm--I've got that filed away and I can--I can use it at some later date. And that's really the wonderful thing about investments is your knowledge is cumulative. So if you learn about coal or you learn about retailing or something, 40 years you--it's useful at some point.

QUICK: Wait, does that make you think that an investment in a tar sands company, somebody who's making--taking advantage of that would not be worth it at $120 a barrel for oil?

BUFFETT: Well, the biggest variable in whether it's a good investment is the price of oil. Now, it's important to know how much they can get out and what their costs are going to be and what the capital costs--all of that is important and that fits into it. But you still have to figure out what your own feeling is about what oil's going to be selling for three years from now or five years from now. Because you could be the world's greatest mining engineer, but if you were wrong about the price of oil in a big way it would negate all that knowledge. So it--I can tell you that if 100--if you had $120 oil from now till, you know, 50 years from now, that the tar sands would be--would work out very well. But I don't know the answer to that. And I may form an opinion at some point, and I've got it--I'm prepared to form that opinion now.

QUICK: But you are not actively looking right now to invest in any of these companies?

BUFFETT: Do I have a buy order this morning? The answer's no.

QUICK: OK. Warren, we have a lot more to get to with you this morning. When we return, we're going to be speaking more with Warren Buffett. Again, this is a big day. We've still got two hours left and we've still got two big stories coming up. Again, I'm here live with Warren Buffett in Omaha. We're also going to be covering everything that's happening with the Olympics. Carl is standing by live in Beijing. This is day 13 of the Olympics, coming to an end. We'll have more SQUAWK in two minutes.

CLICK HERE FOR PART THREE

Current Berkshire stock prices:

Class A:

US%3bBRK.A loading...

Quote  |  Chart  |  News  |  Profile

[US;BRK.A  Loading...      ()   ]

Class B:

US%3bBRK.B loading...

Quote  |  Chart  |  News  |  Profile

[US;BRK.B  Loading...      ()   ]

Questions?  Comments?  Email me at