No company likes to cut its dividend, especially a company like BP which has a reputation for providing pension funds with a reliable stream of income. He has done his best to keep shareholders gentle by announcing that he will use some of his excess cash to buy back shares.
But unlike Direct Line, which announced a special payment to shareholders because less traffic on the roads meant fewer insurance claims, the lockdown has not been favorable to the big tanker. The year started with Brent crude trading at $ 70 a barrel, but the price fell as the roads emptied and planes were grounded, eventually hitting a low of $ 20 a barrel. The price has since doubled, but it’s hard to see why it would go much higher anytime soon.
While this is a short-term issue, it is also an opportunity for the company to deliver on the 20-year commitment to change the meaning of BP to Beyond Petroleum.
The need for a change of pace to honor this commitment now seems recognized. Investments in low-carbon energies are expected to increase tenfold to reach $ 5 billion per year by 2030. Over the next decade, the capacity for renewable energy generation will be multiplied by 20 and production. oil and gas will be reduced by 40%.
All of this is welcome, although realistically BP has a simple choice: change or die slowly. The only question is whether its timetable is ambitious enough.
No wonder there is a gold rush
Gold investors are very enthusiastic. Over the past few weeks, the price of the precious metal has been steadily rising and now stands at just under $ 2,000 an ounce. This is a record high in nominal terms, although corrected for inflation in gold, it would still have to rise by about $ 800 to reach the level reached in early 1980.
Back then, gold was a classic safe haven game. There were geopolitical tensions following the Soviet invasion of Afghanistan and the deterioration of US-Iran relations after the Islamic revolution. There was double-digit inflation in the United States, the dollar was weak, and the world economy was going through its second recession in a decade.
Seems familiar? Replace the Soviet Union with China, and the only substantial difference between 1980 and 2020 is that inflation is not a concern for central banks and finance ministries. The Federal Reserve, the central bank of the United States, is expected to announce shortly that it is easing its inflation target and for some investors there is only one way to end this. The US recovery is faltering and the desire to avoid a second Great Depression will translate into lower interest rates, an expansion of quantitative easing programs, higher federal government borrowing levels and – ultimately – much higher inflation levels. As a result, they sell the dollar and turn into gold.
Flee Covid Fatigue
Easyjet’s decision to roll out additional flights over the summer is interesting, as is the thinking behind it. Airline says sun-seekers discouraged from traveling to Spain due to government quarantine restrictions are not giving up on going abroad, instead booking vacations to Greece, Turkey and Croatia. Conclusion? The UK has a severe case of Covid-19 fatigue. Locking down the economy a second time would not be easy.