Japanese oil refiners face daunting challenges

Japan’s oil wholesalers, faced with tough challenges, are resorting to different strategies to address these challenges. The average gasoline prices in the country recently topped JPY150 (US$1.84) per liter, which analysts consider a psychological benchmark that could make consumers cut back on spending. The price of gasoline had already reached more than JPY150 (US$1.84) per liter three times in the past years, but analysts say that the recent increase could have a bigger impact on the domestic oil industry than previously. Since it peaked in 2004, domestic demand for gasoline had been declining due to a declining population, rising vehicle fuel efficiency and other factors. But the damage to the Fukushima Daiichi nuclear power plant has kept the oil industry from cutting down on refining capacity, despite projections of a long-term decline in demand. Although Idemitsu Kosan decided to close a refinery after last year’s earthquake and tsunami, other oil refiners have decided to revive damaged and idled refineries. JX Nippon Oil and Energy Corporation’s Sendai refinery has been fully operational since February and Cosmo Oil Company Ltd. revealed plans to resume partial operations at its Chiba refinery.
Japan’s oil refiners map out strategies
Rising gasoline prices, declining demand and the resulting potential overcapacity has led Japan’s oil refiners to come up with different business strategies. JX Nippon has expanded into midstream and upstream businesses. The company is also expanding its alternative energy businesses abroad. Idemitsu Kosan has decided to focus on its overseas operations, such as its oil refinery project in Vietnam. The company is also venturing into other areas: It plans to build a plant in South Korea which will make electroluminescence materials. Showa Shell Sekiyu K.K., meanwhile, said it is expanding its solar panel business. Only Cosmo has remained focused on oil-related businesses. (March 23, 2012)