Five years ago, the BP (LSE: BP.) share price was down in the dumps.
BP had set itself net-zero carbon emissions targets — no matter how bizarre that sounded coming from a huge global hydrocarbons company. The plans are shelved now.
And in the past five years the price has rebounded 120%. So £5,000 invested back then would have turned into £11,000 today. Oh, no, that’s not quite right. With dividends it would be around £13,100 — approximately, using today’s exchange rates.
The next five years?
It really shows how uncertainty, short-term market trends, and price volatility can affect even mature stocks long considered stable. But what might it tell us about the future?
I expect lots more uncertainty. Oil under $60 in a year? Maybe over $80? I’ve no idea. But that’s the range we’ve seen in just the past 12 months.
Right now oil is going up and down based on the daily utterances of people like President Trump — who seems as likely to contradict himself the next day as not.
Energy demand
We can be confident of one thing. Energy demands are going to keep on rising. And if BP can continue to pump oil at profitable levels, it could keep on generating the cash flow to pay its healthy dividends — with a 5.7% forecast yield right now.
In the first half of 2025, BP was pumping oil at an upstream production cost of around $8.50 per barrel. There’s a lot more between that and bottom-line profit. And that cost is higher than it’s been in previous years. But it does suggest that there’s still a lot of profit potential in oil.
BP still needs to control costs carefully, and maximise its free cash flow. But I’m not seeing any problem there just now.
Energy competition
A few years ago, renewable energy from sun, sea and wind looked like the big threat to oil profits. But it’s a very slow process getting up to the kind of energy levels we can get from hydrocarbons.
I’d rate the next generation of nuclear power as the biggest threat these days. We’re still some way away from Rolls-Royce Holdings shipping out its small modular reactors (SMRs) in large numbers.
But they’re progressing well — given an extra boost by the energy demands of AI computing. And other companies are pursuing similar technologies.
The experts
Checking analyst forecasts, I’m seeing BP share price targets ranging between 400p and 525p. With the price at 435p at the time of writing, that’s not very helpful. And most are reluctant to plump for a Buy or Sell, preferring to sit on the Hold fence.
BP might be the FTSE 100 stock I have the most difficulty trying to make up my mind about right now. But that’s fine, we’re allowed to not know what to think.
When I’m this uncertain, I simply don’t buy — there are plenty of other stocks I’m more confident of. But BP still has to be one that investors should consider at today’s price. It could keep paying those dividends for a good few years yet.
