Japan to release state oil reserves as Hormuz Strait remains all but closed

Hind Al Soulia - Riyadh - TOKYO — As Iran maintains its chokehold on the Strait of Hormuz, Japan’s government will begin releasing its national reserves on Thursday.

The government will sell about 53 million barrels, the equivalent of one month of domestic consumption, to four major oil wholesalers through negotiated contracts.

The plan was announced at a meeting of relevant Cabinet ministers on the Middle East situation on Tuesday.

This is part of a broader plan to release up to 45 days’ worth in total—its largest ever—alongside additional releases from private-sector stockpiles, to minimize disruptions in the world’s fourth largest economy.

The volume represents 20 percent of the country’s government stockpiles, which covered 146 days of domestic consumption as of March 21.

“We would like the government to swiftly decide on the next batch of release,” Shunichi Kito, president of the Petroleum Association of Japan, told reporters.

Japan holds one of the world’s largest oil stockpiles with roughly 254 days of consumption across government and private reserves. But it still imports over 90% of its crude oil from the Middle East, leaving Japan exposed to during the US and Israel’s war with Iran.

While the government has avoided strict energy-saving mandates so far, it has warned against panic buying of toilet paper amid supply concerns.

And as fuel prices hit record highs of 190 yen ($1.20) to the liter, Japan has rolled out subsidies for fuel products to cap gasoline price at around 170 yen ($1.07) per liter.

Japan is better prepared than many of its neighbours when it comes to an energy crunch. And it has the 1970s oil shocks to thank for that.

The global economy was hit by stagflation in the 1970s, triggered by the Oil Crisis of 1973. Following the Yom Kippur War, Arab oil producers cut supply and raised prices. Crude oil prices roughly quadrupled within months, sending shockwaves through import-dependent economies like Japan.

Japan relied on imports for nearly all its oil, and its postwar economic boom abruptly stalled. Panic buying spread and in 1974, Japan’s economy contracted for the first time since World War II, marking the start of slower growth.

A second shock, the 1979 Oil Crisis, drove prices up again. But by then, Japan had begun adapting—investing in energy efficiency, diversifying energy sources and building strategic reserves. — Agencies