As the oil price falls, the Shell (LSE: SHEL) share price inexorably follows. The FTSE 100 energy giant is down 8.21% in the last month. That leaves it trading at the same level as a year ago.

Shell’s profits plunged from a record $40bn at the height of the 2022 global energy crisis to $28.3bn in 2023, a drop of a third. But that was still the second highest figure since 2011. So is the recent decline a buying opportunity?

Oil is a highly cyclical sector, so I prefer to buy when stocks are down rather than up. I resisted chasing BP and Shell upwards when oil prices flew in 2022. By my own logic, I should dive in and buy them today.

How sure can we be of Shell?

With Shell’s shares trading at just 8.01 times earnings, roughly half the FTSE 100 average of 15.3 times, they look tempting.

Just because a company’s share price has fallen, doesn’t mean it can’t fall further. There are good reasons why the oil firm is down in the dumps today, as the slowing Chinese economy knocks demand, while a soft US economic landing is far from assured.

Also, OPEC+ members appear keen to ramp up production, despite (or even because of) today’s low price. This can only make a bad situation worse for producers. Last month, OPEC cut oil demand forecasts for 2024 and 2025.

The oil price has picked up slightly in the past couple of days, with Brent crude edging up to $73.16 a barrel. Investors are pinning their hopes on falling interest rates, which they hope will fire up a global recovery. We’ll see.

The good news is that Shell can break even with oil as low as $30 a barrel. I don’t expect the price to fall anywhere near as low as that.

Plenty of shareholder rewards

Shell isn’t the unstoppable income machine of yore, sadly. The trailing yield of 4% is only marginally better than the FTSE 100 average of 3.8%. However, dividends per share have slowly recovered after being reversed at 65 US cents per share in 2020. Shell increased this to 89 cents in 2021, $1.04 in 2022, and $1.29 in 2023.

The board recently launched yet another $3.5bn share buyback, covering just three months. So it clearly thinks its shares are good value.

Shell remains under pretty constant pressure from green campaigners, who want it to slash fossil fuel production and pump more of its profits into renewables. The switch towards electric cars has hit a few bumps in the road, but the long-term direction of travel is still clear, and a challenge for Shell.

Shares don’t fall for no reason. Oil and gas production is a risky business at the best of times. I’m keen to buy Shell shares at today’s price. But I accept that I may have to suffer short-term pain before I enjoy the long-term gains.