A Review of the Evolution of the Japanese Oil Industry, Oil Policy and its Relationship with the Middle East
The Japanese oil industry and oil policy are undergoing a major transformation due to decreased oil demand and industry rationalization. As recently, as 1997 oil imports in Japan exceeded 5.7 Mb/d making the country the second largest oil consumer in the world. The oil industry itself was highly fragmented and comprised for former national oil companies, trading companies, and private oil companies. However, by 2016 imports had fallen below 4 Mb/d and considerable market consolidation had taken place with the emergence of market leaders. This development and a further expected fall in oil demand to 2.5 Mb/d by 2030, requires a re-evaluation of the country’s relationship with oil and especially on the feasibility of actively supporting domestic oil firms in acquiring overseas equity oil. Japan’s historically high oil import dependency (99.7% – 2016) and reliance on Middle Eastern suppliers (87.2% – 2016) resulted in a policy of actively seeking overseas equity oil and sometimes at a premium. The related oil development policy (resource diplomacy), has been a driving factor in Japan’s relationship with the Middle East but is also expected to change considering decreased oil demand. This study addresses these developments along with providing an up to date review of the major players in the Japanese oil industry, their strategies, involvement in the Middle East and a discussion of how oil producers are securing their market share in Japan.