Giddy investor appetite has sent shares in fossil fuels leviathan BP (LSE: BP) surging following a tough few months.

Since striking five-and-a-half-year troughs of 310.25p per share back in February, BP has seen its stock value appreciate 15% as Brent crude has reclaimed the $40 per barrel marker.

Not only do I believe that this bullish buying behaviour is unwarranted, but I reckon BP should actually be dealing at just one-third of its current share price.

Risky AND costly

This statement may appear a step too far at first glance. But hear me out.

Conventional thinking suggests that stocks with high-risk profiles like BP should be dealing on a P/E rating of just 10 times or below.

And even though City consensus suggests the oil colossus will swing from losses of 35.39 US cents per share last year to earnings of 17 cents in 2016, this still results in an elevated earnings multiple of 28.7 times.

A share price rerating to bring it in line with the benchmark of 10 times would leave the business dealing at just 120p per share, representing a 66% reduction from current levels around 355p.

Pumpers keep on pumping

So great are the hurdles facing BP and its earnings outlook that a reading around this figure is only fair value, in my opinion.

Brent values began their ascent in February on hopes that a touted supply ‘freeze’ between OPEC members Saudi Arabia, Qatar, Venezuela and non-group member Russia would lead to a much-needed production cut.

The reception by other OPEC producers has been less than encouraging, however. Iran and Libya have already poured scorn on the idea, with the former pledging to return pumping to pre-sanction levels in the months ahead.

And as US production also heads steadily higher, a rapid improvement in oil consumption is needed to gobble up ample global inventories.

But a deteriorating Chinese economy means that global demand looks set to worsen, not improve — indeed, China’s imports of the black stuff sank to three-month lows of 26.69m tonnes in January.

Long-term concerns

Of course investment decisions should be based on a long-term time horizon, and many stock pickers will be looking past BP’s earnings outlook for this year and possibly 2017.

Still, the oil giant’s earnings outlook for the coming years can’t be considered anything worth writing home about either.

Even once commodity prices recover, a stream of huge asset sales and capex reductions is likely to significantly hamper BP’s ability to reap the rewards. Furthermore, schemes to reduce carbon emissions across the globe create a further problem for BP’s long-term revenues picture.

Look to Lonmin

Anyone scoffing at my bearish call on BP’s share price should take heed from platinum giant Lonmin’s (LSE: LMI) collapse of recent years.

The company was dealing around £17.80 per share just five years ago, but a combination of sinking metal prices and vast operational costs has left the business clinging to life. Lonmin was recently dealing at just 127p per share, a couple of rights issues in recent times helping to keep the wolves from the door, at least for the time being.

Given the precarious state of BP’s earnings outlook, I believe that shares in the oil colossus are also in danger of entering freefall, and that risk-intolerant investors should steer well clear of the stock.

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Royston Wild has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.