Japan mulls releasing oil reserves in extraordinary move following US request

TOKYO -- The Japanese government on Nov. 19 began preparations to release part of its oil reserves following a request by the U.S. government, an extraordinary move apparently designed to counter rising oil prices.

The U.S. government earlier requested countries including China and Japan to release oil stockpiles due to concerns of a global economic downturn amid a crude oil shortage. The Japanese government will carefully consider the amount it will release, revealed multiple sources close to the government.

Washington is also considering releasing crude stockpiles, and the Japanese government is poised to act in concert with the United States and other countries. A senior official in the prime minister's office commented, "There's no point if Japan acts alone. We will do this in cooperation with the U.S."

Japan has released oil reserves in times of disaster, including after the March 2011 Great East Japan Earthquake and tsunami, but it is extremely unusual for oil reserves to be released for what can only be seen as a counter to soaring gasoline prices.

The average retail price of gasoline in Japan has stayed high for a prolonged period for the first time in about seven years and three months, and stood at 168.9 yen (about $1.48) per liter as of Nov. 15. As this has begun to impact the lives of citizens, the central government included a measure in its economic stimulus package compiled Nov. 19 to provide aid of up to 5 yen (about $0.04) per liter to primary oil distributors when the price exceeds 170 yen (about $1.49).

Japan's oil reserves program comprises three types: national stockpiles, private oil company stockpiles mandated by law, and joint stockpiles stored in collaboration with oil-producing nations. Japan's petroleum reserves total about 81 million kiloliters.

The Oil Stockpiling Act allows oil reserves to be released when there is "a shortage of oil supplies in Japan." The law does not envision releasing stockpiles to stabilize prices, and the government's move is likely to stir controversy.

The Japanese government has released oil stocks five times total, including following the March 2011 earthquake disaster and in June the same year, when it ordered the release of private sector reserves in response to an oil shortage triggered by the Libyan civil war. There have been no releases since. The central government is also considering using profits from the stockpile release to assist oil distributors.

The global economy is on its way toward recovery as coronavirus vaccinations have progressed, pushing increased demand for oil. Crude oil prices have been hovering around $80 a barrel, leading to rising gasoline prices in many countries. U.S. President Joe Biden has repeatedly demanded increased oil production from the OPEC+ alliance, consisting of OPEC members and non-members that are major oil-producing nations, but the oil producers have remained hesitant to raise output. And so, the U.S. government has requested Japan, China, India and South Korea to consider releasing oil stockpiles.

(Japanese original by Shiho Fujibuchi, Political News Department, and Yuki Takahashi, Business News Department)