Japan to subsidize oil importers amid high shipping costs

Industry Minister Ryosei Akazawa stated that the legislation is designed to improve supply security by diversifying crude oil and other fossil fuel sources. Last week, he elaborated that the support would cover additional costs, including increased transportation expenses due to changes in crude oil routes, ensuring necessary insurance mechanisms are in place, and supporting the development of alternative transportation methods like pipelines.

Japan's oil import expenses have surged to unprecedented levels. This is attributed to the closure of the Strait of Hormuz, a critical chokepoint for its imports, alongside a spike in crude oil prices and escalating freight and insurance costs. Prior to the current geopolitical tensions, over 90% of Japan's crude oil imports originated from the Middle East, with approximately 70% of these supplies transiting through the Strait of Hormuz.

In response to supply disruptions, Japan has been actively seeking crude oil from distant sources such as Canada, Azerbaijan, and various African nations to compensate for reduced deliveries from the Persian Gulf. However, sourcing oil from these faraway locations significantly increases transportation expenses and weighs on the nation's industrial and economic activities.