In 2025, the BP (LSE:BP.) share price increased by 10.1%. Given that the cost of a barrel of Brent crude fell by more than a fifth over the year, I think this is a pretty good result. However, it was less than the 10.7% rise in Shell’s price. Indeed, from the end of 2020 to 31 December 2025, BP’s price went up by ‘only’ 70% compared to the 111% increase in that of its larger FTSE 100 rival.
But I think there are three reasons why things could be different in 2026.
1. Efficiency gap to narrow?
First the bad news on BP. Shell’s total revenue and operating income for the nine months ended 30 September 2025, was over 40% more than its peer’s. And its operating cash flow was twice as high. Yet the latter employs nearly 5% more people, adding to its costs.
| Measure (9 months ended 30.9.25) | Shell | BP |
|---|---|---|
| Total revenue and other income ($m) | 207,006 | 144,807 |
| Operating cash flow ($m) | 33,425 | 16,891 |
| Employees (number) | 96,000 | 100,500 |
A closer look at BP’s cost base confirms that it’s much less efficient. For example, over the same period, production and manufacturing expenses accounted for 13.1% of total income versus 7.8% for Shell. It’s a similar story with distribution and administrative expenses. If the figures for the two were the same, BP’s earnings would have been $14.1bn better.
| Costs as a proportion of income (9 months ended 30.9.25) | Shell (%) | BP (%) |
|---|---|---|
| Production and manufacturing expenses | 7.8 | 13.1 |
| Distribution and administration expenses | 4.4 | 8.9 |
But facing pressure from some of its largest shareholders, BP’s embarked on a cost-cutting exercise and is in the process of offloading some of its non-core assets. If the group can demonstrate that it’s closing the efficiency gap, I’m sure its share price will outperform that of Shell’s over the coming months and years.
2. Better dividend
Although shareholder returns can never be guaranteed — particularly in the energy sector where earnings can be volatile — BP’s shares are currently (5 January) yielding 5.5% compared to the 3.9% return at Shell. This is based on amounts paid over the past 12 months.
Income investors looking for high-yielding shares (if, as expected, interest rates continue to fall) could favour BP.
3. Increased uncertainty
The US decision to capture and put on trial Venezuela’s leader, Nicolás Maduro, could lead to an increase in oil prices. The South American country’s believed to have more oil reserves than any other nation and during the third quarter of 2025, it was the eighth biggest OPEC oil producer. It’s unclear what’s going to happen next but any disruption to supply could impact prices.
Similarly, ongoing political tensions in the Middle East are also being watched closely by industry observers. President Trump has said: “We are locked and loaded and ready to go” if Iran “kills peaceful protestors”. And although the Israel-Hamas ceasefire seems to be holding at the moment, it appears fragile.
Energy markets don’t react well to uncertainty. Given that BP generates a greater proportion of its revenue from ‘black gold’ than Shell, it’s likely to benefit more should oil prices rise.
Final thoughts
With industry earnings heavily influenced by unpredictable energy prices, it’s impossible to forecast with any certainty how stocks in the sector will perform. However, due to the reasons outlined above, I think BP stock – relatively speaking — could do better than Shell over the next 12 months.
Of course, BP’s shares are unlikely to appeal to ethical investors. And the group’s net debt has been steadily increasing in recent years. But with its attractive dividend and the potential to improve its efficiency, I think it’s a stock to consider.
