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Japan to lobby Saudi, UAE, and other oil nations to boost supply

Kishida Instructs Whole-of-government Approach As International Prices Soar

Screenshot 2021-10-19 153357

Gasoline prices have jumped to seven-year highs in Japan.   © Reuters

 Japan will urge petroleum-producing nations to raise output and ease the soaring global oil prices that have hurt both corporate earnings and household budgets.

The plan to lobby oil producers, in collaboration with the International Energy Agency, is based on directives by Prime Minister Fumio Kishida. Tokyo also looks to offer state support for affected industries, as officials from relevant ministries met Monday to discuss ways to address the oil price rally.

"The government as a whole will respond swiftly to make sure there is no disruption to industry or the daily lives of citizens," said Chief Cabinet Secretary Hirokazu Matsuno, who attended the meeting.

The national retail price of gasoline averaged 162.10 yen ($1.42) per liter on Oct. 11, according to the Ministry of Economy, Trade and Industry, a high not seen in roughly seven years. This drag on households and businesses comes as Japan seeks an economic recovery from the COVID-19 crisis.

Tokyo will work with the IEA to ask Saudi Arabia, the United Arab Emirates and other major oil producers to boost output. OPEC Plus, which includes non-OPEC states like Russia, decided Oct. 4 to keep November production in line with an existing agreement.

Oil producers are gradually unwinding production cuts agreed upon in May 2020 in response to the coronavirus pandemic. But supplies have yet to match the higher demand.

Koichi Hagiuda, the trade and industry minister, said after Monday's meeting that he intends to talk with oil producing nations ahead of the OPEC Plus meeting set for early November.

"I look to prepare to make my petitions to OPEC nations through direct talks online," he told reporters.

Daishiro Yamagiwa, Japan's economic revitalization minister, also attended Monday's meeting.

Foreign Minister Toshimitsu Motegi spoke by phone Monday with Kuwaiti counterpart Ahmad Nasser Al-Mohammed Al-Sabah, asking for the Persian Gulf country's cooperation toward stabilizing the market including via greater crude production.

It is unclear when this lobbying effort will bear fruit, or in what fashion. Japan is encouraging domestic sectors that are heavy oil consumers to tap Tokyo's support programs.

Fishing boat operators are eligible for compensation when crude oil prices surpass a certain threshold, or during sudden price spikes. The oil rally dating from the end of 2020 means that disbursements will apply to impacts from January onward.

But many fishers appear unaware of the program, leaving the Ministry of Agriculture, Forestry and Fisheries to get the word out. The government also will advertise similar relief for greenhouse farmers, who are dealing with higher heating costs. The payouts will be applicable from March.

The trucking industry faces high fuel prices as well. A government guideline from 2008 advises trucking businesses to pass on extra fuel costs to transport fees, but many of the companies lack such leverage with shipping clients.

The transport ministry provides consulting services to trucking operators in which shipping clients suspected of engaging in illegal practices are pressured to institute reforms. The ministry will crack down on offenders through this process. METI will provide similar consulting services to small and midsize businesses.

China said last month it will release part of its petroleum reserves to the market for the first time, looking to fight higher oil prices. But Japanese officials did not adopt this policy on Monday, staying in line with the vast majority of other countries.

Japan has authorized the release of private-sector petroleum reserves in multiple instances, such as in 1991 during the Gulf War and in the aftermath of the 2011 earthquake and tsunami that struck northeastern Japan. But such measures are taken when supply shortages are feared. The relevant law carries no provisions for opening reserves to combat high oil prices.