Prime Minister Fumio Kishida said Monday that Japan is keeping an eye on the recent surge in oil prices and will urge major producers to boost output to quell concerns of a supply deficit.
“We are closely watching movements in the crude oil market as well as the impact on domestic industry and households,” Kishida told reporters after calling an emergency meeting of Cabinet members including Chief Cabinet Secretary Hirokazu Matsuno and industry minister Koichi Hagiuda to discuss the matter.
Oil prices have climbed sharply over the past two months as demand recovers from the COVID-19 pandemic, with benchmark West Texas Intermediate crude futures rising to $82.28 per barrel on Friday in New York, their highest level in seven years.
The surge has sent gasoline prices in Japan climbing, possibly putting a damper on household spending at a time when domestic travel is expected to increase after the state of emergency was lifted at the start of this month.
Kishida said he instructed the ministers to work with the International Energy Agency to call on oil-producing countries to increase output and to “swiftly take appropriate action” to help industries that may be negatively affected.
“We will take concrete steps in our respective roles,” Matsuno told reporters, without going into further detail.
If crude oil prices remain high, it may lead to a jump in prices of a broad range of products and services, such as electricity and plastic goods.
On top of the energy price surge, soaring prices of cooking oil and other items are also a major burden on households. “The risk of households’ real purchasing power falling and consumption slumping consequently is on the rise,” said Makoto Noji, chief currency and foreign bond strategist at SMBC Nikko Securities Inc.
Concerns about rising energy prices are also prevalent in the business world, with an official of a major parcel delivery firm complaining of ballooning fuel costs.
Many companies are trying to avoid raising the prices of their products and services by cutting costs in other aspects of their operations, but such efforts have their limits. With prices of fuel oil for vessels shooting up, an official of a major shipping firm voiced concerns about a negative impact on its earnings.
Demand for crude oil and liquefied natural gas is expected to soar globally as countries and regions around the world recover from the novel coronavirus crisis.
Electricity and city gas rates “may be hiked from next spring to summer,” an economist said, predicting that tough conditions for households and companies will continue for the time being.
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