Japan Moves to Shield Consumers from Soaring Gasoline Prices

Japan’s government will implement measures to ensure that the Israel-Iran conflict and potential escalation wouldn’t result in major spikes in gasoline prices in one of Asia’s most oil-import dependent large economies.

Japan is part of the G7 group of the world’s most industrialized nations, but it is exposed to international oil price spikes as it imports most of the oil it consumes. More than 90% of the crude oil Japan imports comes from the Middle East.

Amid the many uncertainties over the ongoing hostilities between Israel and Iran and whether they could impact oil supply from the Middle East, Japan will act to mitigate spikes in domestic gasoline prices, Japanese Prime Minister Shigeru Ishiba said on Thursday.

The government will ensure that the nationwide gasoline price on average would not exceed around $1.20 (175 Japanese yen) per liter, Reuters quoted Ishiba as saying. A measure to prevent a price spike will be implemented beginning on June 26, the PM added.

Japan and other major oil importers, as well as the oil market, are closely watching the developments in the Middle East as the conflict nears a week since the start.

As the conflict doesn’t seem to abate, oil supply from the Middle East could become vulnerable if the two sides decide to attack vital energy infrastructure in the region, analysts at RBC Capital Markets said in a note earlier this week.

The oil market’s biggest fear—the closure of the Strait of Hormuz—appears a distant prospect for now, analysts say, although they acknowledge that if oil flows are disrupted in the Strait, prices could easily hit $100 per barrel.

Last year, China, India, Japan, and South Korea were the top destinations for crude oil moving through the Strait of Hormuz to Asia, accounting for a combined 69% of all Hormuz crude oil and condensate flows, according to EIA data.

By Michael Kern for Oilprice.com

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