Down 20% per year, is the price of BP too cheap to ignore?

I BP (LSE: BP.) The share price has been volatile over the past five years. That’s not surprising after the crash of the pandemic, war and conflict, global inflation, and volatile oil prices. But other than that…

BP shares have lost 20% of their value in the past 12 months. it paid dividends at an annual yield of 6.2%. I like the sound of that.

Long term, short term

Let’s put aside the long-term threat to the oil business from alternative energy for now. It won’t last, but I’m sure the oil will still be there until I’m gone.

BP’s price-to-earnings (P/E) ratio of only six in 2026 takes some sting out of it. I feel like that is too pessimistic.

But a different fear worries me going into 2025 – the price of oil. Brent crude has been sliding since April, and is now at $74 per barrel. I might be happy enough with that, except for one thing.

The group of oil producers, OPEC+, aims to start reversing its previous production cuts, which have now been delayed until December after the latest price slump.

Decrease in demand

But forecasts show demand growth is slowing. And yet, OPEC’s view is at the bottom of the sector’s ratings. The International Energy Agency sees more demand this decade, well below OPEC’s hopes.

But wait… at the low end of current estimates, oil demand may only rise this decade? So no one expects it to actually fall any time soon?

Does this mean that renewable energy may not come close to killing hydrocarbons in the near future?

However, if Donald Trump continues his “Hold on, baby, hold on” thing when he is back in office… and the war in Ukraine ends and we can all buy cheap Russian oil again… I don’t like to speculate how low prices might go.

What to do?

I have bought and sold oil stocks several times over the decades. And I’ve always wondered where the cost of a barrel would go. In general, I guessed at a stable long-term level of $75.

But the future may see it a little lower than that. And I think I can do only one simple thing: ignore the price of oil completely.

I should definitely consider buying based on the fact that I think the stock’s valuation looks low today. And if the dividend outlook seems healthy enough to put a decent amount of money in my pocket every year.

From that angle, I find it hard not to want to buy BP shares.

Will do?

I expect BP’s share price to be one FTSE 100It’s going to change a lot over the next decade. But if I don’t plan to sell, that’s fine. I may also find opportunities to buy more at lower prices.

I should be ready to invest more money in my Equity and Shares ISA at the start of the new year. BP will be on the candidate list.