The stock of BP (BP) has plunged 55% this year. Just like the entire energy sector, the stock temporarily bounced off its March lows but it has steadily declined in the last four months. As a result, it is now hovering around its 25-year lows and is offering a 7.4% dividend yield. The depressed stock price of BP has led many investors to wonder whether the stock has become a great bargain. In order to determine this, investors should first understand why the stock has collapsed at its current level.

The pandemic

The pandemic has caused an unprecedented downturn in the energy sector. Due to social distancing and work from home, the demand for gasoline and diesel has significantly decreased this year. Even worse, the demand for aviation fuel has collapsed due to the reluctance of people to travel by plane amid the coronavirus crisis. Consequently, the global demand for