The Motley Fool

Is green energy going to help the BP share price?

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

Businessman scratching his head on white background
Image source: Getty Images.

I believe a long-term focus on renewable energy sources makes sense for oil majors. Firstly, it is a necessity because, eventually, extracting oil will cost more than companies can sell it for. Secondly, and probably more importantly, this is the direction in which demand globally is shifting. It may surprise you to hear then, that I don’t think its focus on green energy will help the BP (LSE: BP) share price. That is, not any time soon.

Nice theory

For months, BP has been setting out its new agenda of focusing on renewable energy sources and becoming carbon-neutral. In August, the company said it will be cutting oil and gas production by 40%, and increasing investment in low-carbon energy tenfold.

One Killer Stock For The Cybersecurity Surge

Cybersecurity is surging, with experts predicting that the cybersecurity market will reach US$366 billion by 2028more than double what it is today!

And with that kind of growth, this North American company stands to be the biggest winner.

Because their patented “self-repairing” technology is changing the cybersecurity landscape as we know it…

We think it has the potential to become the next famous tech success story. In fact, we think it could become as big… or even BIGGER than Shopify.

Click here to see how you can uncover the name of this North American stock that’s taking over Silicon Valley, one device at a time…

This month, the top brass at BP made various presentations to shareholders about these plans. The only problem is that despite all these assurances about converting to renewables, no one has really said how BP is actually going to do it.

BP makes its money from oil and gas. Despite any intentions it has, it is going to keep doing that for the foreseeable future. That means BP’s profits are dependent on the price of oil and gas. With Covid still causing trouble and airlines looking far from strong, its future green efforts may as well be pipe dreams at this point.

Over the next year or so, I don’t think any benefits the BP share price sees from investor confidence in renewable energy will be able to offset poor results that come from low oil prices. That said, I do think there is chance oil prices will start to strengthen sooner than we might expect. Once a Covid vaccine comes out, for example.

Can BP help the world go green?

As I said, as a long-term strategy I think moving towards renewables is a good thing for BP. But ‘long term’ really is the key factor. The truth is that despite all the noises being made about green energy, neither the technology nor the market is there yet. Not quite.

Battery technology and capacity is still a major limiting factor for zero-carbon alternatives like electric cars. Meanwhile the cost of the technology is prohibitive for most of the world. As any free market economist would suggest, if renewable energy sources were already better than the alternative, we would all be using them. This is simplistic, but certainly has a grain of truth.

Yet I think companies like BP are in a perfect position to push the technology forward. BP has been in the business of energy for far longer than renewable companies have been in existence. Indeed, even before green energy was ever talked about.

BP has vast resources, both financial and technical. What’s more, a somewhat sceptical view may be that it is undertaking this shift entirely to make more money, not for ideological purposes. This is exactly what real innovation may need.

Ideology can see people bogged down with technologies that don’t work well, because they are true believers. Focusing on making money is more likely to mean focusing on anything that actually works (and can be sold en-masse).

I have no doubt green energy will be helping BP in the future. For now though, I am looking towards the oil market for guidance.

One Killer Stock For The Cybersecurity Surge

Cybersecurity is surging, with experts predicting that the cybersecurity market will reach US$366 billion by 2028more than double what it is today!

And with that kind of growth, this North American company stands to be the biggest winner.

Because their patented “self-repairing” technology is changing the cybersecurity landscape as we know it…

We think it has the potential to become the next famous tech success story.

In fact, we think it could become as big… or even BIGGER than Shopify.

Click here to see how you can uncover the name of this North American stock that’s taking over Silicon Valley, one device at a time…

Karl Loomes owns shares in BP. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Our 6 'Best Buys Now' Shares

Renowned stock-picker Mark Rogers and his analyst team at The Motley Fool UK have named 6 shares that they believe UK investors should consider buying NOW.

So if you’re looking for more stock ideas to try and best position your portfolio today, then it might be a good day for you. Because we're offering a full 33% off your first year of membership to our flagship share-tipping service, backed by our 'no quibbles' 30-day subscription fee refund guarantee.

Simply click below to discover how you can take advantage of this.