Reports informed by four government sources with knowledge of the plans that Japanese officials are working on ways to get around restrictions on releasing national reserves of crude oil in tandem with other major economies to dampen prices.
While the world’s fourth-biggest oil buyer is restricted on how it can act with its reserves – made up of both private and public stocks – which typically can only be used in times of shortage, Prime Minister Fumio Kishida signaled his readiness over the weekend following a request from Washington.
As a legal workaround, the government was looking into releasing from the portion of the state-held stocks outside the minimum amount required, as explained by one of the sources.
A second source said that officials are also looking at private stocks that are part of the national reserve, which some advisers argue can be released without restrictions. A third source said:
“We have no choice but to come up with something” after a request from the United States.”
Since the plan has not been made public, all of the sources declined to be identified.
On November 22, 2021, Chief Cabinet Secretary Hirokazu Matsuno said that nothing had been decided, while Kishida said the government was in the process of considering what it could do legally on Saturday. The second source mentioned:
“We would have to change our law and that would take time. But some are arguing that private stockpiles can be released.”
“We need to expand the definition so they can be released. But, no tender is imminent.”
Traders said they had received no notifications of a tender.
According to state agency Jogmec, which administers the SPR and handles releases after policies are decided, Japanese private companies including refiners hold about 175 million barrels of crude and oil products as part of the Strategic Petroleum Reserve (SPR), enough for around 90 days’ consumption.
During the 1991 Gulf War and following the 2011 earthquake and tsunami disasters, oil companies’ reserves have been tapped. According to Fereidun Fesharaki, chairman of Facts Global Energy, the state’s portion in the SPR has never been used and Japan has an “absurd” level of petroleum stocks on hand. Fesharaki said in a phone interview:
“There is no way the Japanese government will do anything unless the U.S. asked.”
Fesharaki said that the resource-poor country’s excessive attention to maintaining reserves comes from a mindset among bureaucrats who were around during the oil crises of the 1970s and 1980s.
“Until that group dies off there won’t be any change.”
After prices plunged on November 19, a decline that was largely attributed to impending lockdowns in Europe rather than plans to release the oil, Brent crude recovered from earlier losses and was up around 0.5%.
Seeing that high prices are starting to produce unwanted inflation and undermine recovery from the COVID-19 pandemic, the Biden administration made the unusual request to other major economies to consider releasing oil from their strategic reserves.
Japan and the United States would coordinate an announcement of the release of oil reserves as early as this week, the Yomiuri newspaper said, citing government sources.
In line with official data, Japan’s oil reserve held 145 days’ worth of daily petroleum consumption at the end of September, well above the minimum 90 days required by law.
Also, the private sector exceeded the minimum 70 days’ requirement, by having reserves total of 90 days’ worth. today, India has 26.5 million barrels of oil in its SPR.