Soaring gasoline prices worrisome for industry, household finance

REUTERS/Kiyoshi Ota (JAPAN)/File Photo
A worker fills a lorry with gasoline at Japan Energy group’s Kashima Oil refinery in Kamisu, about 80 km (50 miles) north of Tokyo, June 14, 2007.

The prices of petroleum products such as gasoline and kerosene, which are indispensable for people’s daily lives, have continued to rise. If this situation becomes protracted, there are concerns that it will have a negative impact on the economy. The government must take all possible measures.

The average price of regular gasoline nationwide has risen to ¥167.3 per liter, up for the eighth consecutive week. It is reportedly the highest price in about seven years.

This is because the price of crude oil, the raw material for gasoline and other oil products, has risen. The price of U.S. crude oil futures at one point reached around $85 per barrel, almost double what it was a year ago. Japan relies on imports for the crude oil it uses, and the weak yen has also accelerated the high price of gasoline.

While demand is increasing due to the recovery of the global economy, the price increase was spurred by the fact that OPEC+, which consists of the Organization of the Petroleum Exporting Countries (OPEC) members plus Russia and other nonmembers, decided earlier this month not to significantly increase crude oil production.

OPEC+ is scheduled to hold another meeting in early November to discuss future production. The government must work with the United States and other countries to urge the group to increase production.

The oil-producing countries are believed to be reluctant to increase production, but if the world economy cools due to soaring crude oil prices, it will negatively impact them as well. They need to recognize the importance of market stability.

In Japan, trucking companies, farmers, fishermen and other businesses who are heavily burdened with the cost of fuel will see their profits squeezed. The government needs to gather information through its consultation services and to expand measures such as partially paying fuel costs, depending on the situation.

Also, the impact on household finances cannot be underestimated, as the cost of kerosene used for heating in winter, among other items, will go up. The government should keep a close eye on the impact as it could cool the economy, which is in the process of recovering from the novel coronavirus pandemic.

Price hikes are not limited to crude oil. In Europe, where renewable energy has been expanded in an effort toward decarbonization, abnormal weather has seen weaker winds and reduced the output of wind power. Demand for natural gas as a fuel for alternative power generation has skyrocketed, and prices have risen.

With a shortage of natural gas, increased demand for crude oil, the next alternative, is pushing up prices, triggering a chain reaction of high resource prices around the world. The price of coal has also risen, and China, which is highly dependent on coal, is experiencing power shortages.

It is said the spread of decarbonization efforts has led to a decline in investment in oil and gas fields. Renewable energy has not been able to meet growing energy demands.

To ensure that the rapid shift to renewable energy does not lead to an energy crisis, countries must also pay attention to the stable supply of crude oil and gas, which will serve as a bridge. In Japan, it is also essential to make effective use of nuclear power.