The photo is sourced from futurebridge.com
According to the EIA, demand for oil in Japan reached a historical maximum in 1996 when its volume amounted to 5.7 mln.b/d. However, later oil consumption was decreasing on average by 2% per year. On the one hand, gradual withdrawal from using petroleum products in electric power industry had a certain effect: while in 2000 generation of electric energy by the coal-fired thermal power plants (TPP) in Japan was 183 terawatt/hours (TWh), but based on the results of 2022 it was a mere 46 TWh and its share dropped from 16.6% to 4.4%, respectively, according to the data of the Ember research centre. Use of electric cars also played an important role: sales of new electric cars and hybrids in Japan in the car segment in the past ten years have grown by more than four times (from 24 thousand pieces in 2012 to 102 thousand in 2022). While this occurred, in the segment of light commercial transport this growth was more than tenfold (from 2.5 thousand to 28 thousand pieces).
Finally, demographic shifts had an effect, too. According to the World Bank, in 2022 the share of persons aged 65 and more constituted 30% of Japan’s population, in the EU countries this share was 21%, in the USA it was 17%, in China 14%. Along with the long-term stagnation in the economy that had begun back in the 1990-s, this caused a slowdown in demand for oil, which, after 2024, will be lower than the level of 1996 by more than 40% (3.3 mln.b/d versus 5.7 mln.b/d).
One of the consequences of demand reduction was a shutdown of several Japanese oil refineries, which were mostly focused on the supply to the domestic market. Thus, in October 2023 the ENEOS company stopped the work for good of an oil refinery with capacity 120 thousand b/d located in the west of Japan. In turn, the Idemitsu Kosan company is about to close down a refinery with capacity 120 thousand b/d in the south of the country in March 2024. As a result, the capacity of refineries operating in Japan will decrease by a total of 7%.
On the whole, shifts on Japan’s market reflect general risks of a slower demand for oil in the OECD countries, where relatively low rates of economic growth are combined with population ageing and a sharp rise in the popularity of electric transport. It is not incidental that last year the share of hybrids and electric cars in the sales of new cars reached a maximum both in the USA (12.5%) and in the EU (44.1%), according to the data of the EIA and European Automobile Manufacturers’ Association.