The Motley Fool

BP share price: could the company profit from this nearly limitless energy?

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.

Silhouette of an oil rig
Image source: Getty Images.

Green energy is the rage these days. Tesla has a higher market cap than BP (LSE: BP) and Royal Dutch Shell combined. Given its position as a leading energy provider, BP is joining the movement and trying to go green as well. BP recently decided to further invest in this practically limitless energy sector. Here’s more on the oil giant’s move and what I think it could mean for BP share price.

Nearly limitless energy

BP recently participated in a $40m investment round for a startup named Eavor Technologies. Eavor has an ambitious plan to generate enough power to meet the needs of around 10m homes by 2030 using geothermal technology.

5G is here – and shares of this ‘sleeping giant’ could be a great way for you to potentially profit!

According to one leading industry firm, the 5G boom could create a global industry worth US$12.3 TRILLION out of thin air…

And if you click here we’ll show you something that could be key to unlocking 5G’s full potential...

Geothermal takes heat from under Earth’s surface and converts it into electricity. Given that the heat under the Earth is so huge, it’s practically limitless and thus considered ‘renewable’. If done correctly, geothermal generation emits very little to no greenhouse gases as well. Unlike wind turbines or solar, which don’t produce energy if there is no wind or sun respectively, geothermal can also always be on if done correctly.

Many analysts think geothermal energy has a lot of growth potential given the right tech improvements, which could make the process of finding, accessing, and managing geothermal resources more economical. In an optimistic case scenario, for example, the US Department of Energy estimated that US geothermal power generation could increase almost 26-fold from 2019 levels to 60 gigawatts-electric capacity by 2050. Under a ‘business as usual’ scenario, US geothermal power generation could increase to around 6 GW of capacity by 2050.

By investing in Eavor through its venture arm, BP is in effect giving the company more resources to potentially make technological breakthroughs that could promote more geothermal adoption in the future.

BP Share price: what I’d do

Given that it isn’t investing very much into Eavor, I don’t think the investment will matter much for the BP share price in the near term. But given how much geothermal energy can grow in the future, there is the chance that BP can make a substantial profit from its investment if the right tech breakthroughs occur.

I think it could be a good thing that management is investing in other energy companies with potentially promising technology. Although it has a world-class R&D operation and immense financial resources, BP doesn’t have a monopoly on energy innovation. Sometimes startups and smaller companies make meaningful innovations that BP or other supermajors have missed. By investing in promising energy startups, BP can in effect diversify its exposure to energy technology more. (Although it may or may not happen, I’d personally like to see the oil giant invest more into fusion startups as well).

As a whole, I am optimistic about BP’s potential in the green sector. I think there are many opportunities to create value and I reckon the company will successfully transition into a greener future. Given the current BP share price, I’d buy and hold the company’s shares.

With this said, BP shares also have risk. Many believe oil production will decline over time, making BP’s green transition more urgent. If BP management were to invest in the wrong green areas or not deliver the results the market expects, the stock could decline. If oil prices fall meaningfully as well, BP might not make as much profit as some expect. 

5 Stocks For Trying To Build Wealth After 50

Markets around the world are reeling from the coronavirus pandemic…

And with so many great companies trading at what look to be ‘discount-bin’ prices, now could be the time for savvy investors to snap up some potential bargains.

But whether you’re a newbie investor or a seasoned pro, deciding which stocks to add to your shopping list can be daunting prospect during such unprecedented times.

Fortunately, The Motley Fool is here to help: our UK Chief Investment Officer and his analyst team have short-listed five companies that they believe STILL boast significant long-term growth prospects despite the global lock-down…

You see, here at The Motley Fool we don’t believe “over-trading” is the right path to financial freedom in retirement; instead, we advocate buying and holding (for AT LEAST three to five years) 15 or more quality companies, with shareholder-focused management teams at the helm.

That’s why we’re sharing the names of all five of these companies in a special investing report that you can download today for FREE. If you’re 50 or over, we believe these stocks could be a great fit for any well-diversified portfolio, and that you can consider building a position in all five right away.

Click here to claim your free copy of this special investing report now!

Jay Yao has no position in any of the shares mentioned. The Motley Fool UK owns shares of and has recommended Tesla. 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.