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Asian governments are taking measures to soften the impact of escalating oil and LNG prices on their economies and help consumers with subsidies and tax cuts.
However, such measures probably won’t be sufficient to offset the sharp increase in energy prices, which is adding to inflationary pressures.
Brent crude oil futures soared toward $120 per barrel on Friday, while the Japan Korea Marker (JKM), Asia’s de facto spot LNG price, surged to $59.67 per million Btu Friday, equivalent to an oil price of $346/bbl.
Inflation was already a major source of concern around the world before Russia launched its invasion of Ukraine, sparking fears of a wider war in Europe.
Japan
Japan — the world’s fourth-largest crude oil importer — said on Friday it will increase the cap on subsidies for gasoline, diesel and kerosene from the current 5 yen per liter (4.4¢/liter) to 25 yen/liter.
In January, Tokyo introduced temporary subsidies of up to 5 yen/liter if retail gasoline prices exceed 170 yen/liter.
This makes Japan possibly the only developed economy to provide fuel subsidies, despite joining a pledge at the COP26 climate summit to end “inefficient fossil fuel subsidies.”
The government said it will take 350 billion yen ($3.03 billion) from this fiscal year’s emergency budget reserves to fund the subsidy.
Japan said on Friday that Japan will release 7.5 million barrels of oil from private reserves as part of a coordinated effort by member states of the International Energy Agency (IEA) to boost supply in an effort to bring down prices.
The IEA announced on Friday that commitments from members have totaled 61.7 million bbl — slightly more than the target of 60 million bbl announced earlier in the week.
The US has committed to release 30 million bbl from its Strategic Petroleum Reserve.
Japan’s Industry Minister Koichi Hagiuda said his country is also gathering information about Exxon Mobil’s recent decision to exit Russia’s Sakhalin-1 project.
Japanese firms own a 30% stake in the project through the Sodeco consortium, which consists of upstream explorers Japan Petroleum Exploration and Inpex, and trading houses Itochu and Marubeni.
“With the global crude oil supply and demand structure becoming unstable, Sakhalin-1 is an important project for Japan,” Hagiuda said.
The minister noted that Japan imports about 90% of its crude oil from the Middle East, adding that the government will do all it can to safeguard its energy security.
South Korea
The government of South Korea — the world’s fifth-largest crude importer — said on Friday it will extend a 20% tax cut on gasoline, diesel and LPG by three months. The tax cut, introduced in November, was originally due to expire at the end of April.
Finance Minister Hong Nam-ki said his ministry is considering a possible increase in the tax cut, given that prices have risen even higher since its introduction.
The government will also continue to exempt LNG from import tariffs for another three months until the end of July. South Korea usually imposes a 2% tariff on LNG imports during the winter months and 3% in other months.
Seoul has committed to contribute 4.42 million bbl of oil to the coordinated release of oil from national stockpiles, according to the IEA.
India
Despite the big run-up in crude oil prices, the government has kept retail prices for diesel and gasoline unchanged since Nov. 4. State-owned refiners have refrained from increasing prices because of elections in five states.
However, analysts expect refiners to increase prices after the last day of voting on Mar. 7.
They also think that the government may cut taxes on fuels while allowing retailers to increase prices, which would provide some relief to consumers.
