Japan Releases Unprecedented Amount of Oil from Its Reserve

Prime Minister Sanae Takaichi announced on March 11th that the government of Japan would release its oil reserve with concern that current effective blockade of Strait of Hormuz by Iran would continue certain long period. International Energy Agency (IEA) simultaneously agreed on coordinated release of their oil reserve to maintain oil price of the world. However, the effect of their policy seems to be limited so far. 

“Our import of oil will significantly decline after late March,” said Takaichi to the press in prime minister’s official residence. She told that the release would start on March 16th and she hoped retail price of regular gasoline to stay at the level of 170 yen per litter as average of all over Japan.

 

Takaichi insisted that her decision was independent from the decision of international organizations. It would mark Japan’s first independent release of oil reserve. However, ministers of Group of Seven had previously agreed on taking necessary measures. IEA decided to release 400 million barrels of oil reserve in 32 member countries. It is fair to say that Takaichi’s decision would be included in the coordinated release.

 

Takaichi has explained that Japan has governmental and private oil reserve for 254 days. Not waiting for the international coordinated release, Japan will release private reserve for 15 days and then national reserve for a month. Total amount of release is estimated to be 80 million barrels, worth for demand for 45 days, making a new record of release of oil reserve in Japan.

 

Takaichi also declared that she would mobilize subsidy for stabilizing gasoline price. Considering a possibility that regular gasoline price would go beyond 200 yen per litter, her government is going to support for the cost of gasoline beyond 170 yen per litter starting March 19th. She hopes to appropriate 280 billion yen from a governmental fund for fuels. If it is not enough, the government will draw necessary fund from reserve budget.

 

Receiving the news of IEA’s coordinated release of reserve, the West Texas Intermediate (WTI) future in New York temporary fell down to the level of 82 dollars per barrel, but it soon rose to 88 dollars. It was reported that a retailer of gasoline in Kagoshima raised its price from 154 yen per litter to 187 yen on March 11. Measures to stabilize oil price has not been working well.

 

It is unlikely that Iran is going to ease the blockade in Strait of Hormuz very soon. A vessel of Mitsui O.S.K. Line was stricken on its stern when it was in Persian Gulf. The supreme leader of Iran, Mojtaba Khamenei, successor of Ali Khamenei who was killed by attack of the United States, issued a comment of continuing protest against the U.S. and Israel. It is not sure that these temporary measures by Japanese prime minister is sufficient to get through possible energy shortage.

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