The Japanese government will begin releasing 30 days’ worth of crude oil from state-owned reserves on Thursday as Iran maintains a choke hold on the Strait of Hormuz.
The move is part of a broader plan to release up to 45 days’ worth of supplies, the largest on record, along with additional releases from private stockpiles, to minimize disruption in the world’s fourth-largest economy.
Japan has one of the world’s largest oil reserves, with government and private reserves combined for approximately 254 days’ worth of oil. However, Japan still imports more than 90% of its crude oil from the Middle East, leaving Japan exposed to the war against Iran between the United States and Israel.
The government has so far avoided strict energy conservation obligations, but it is sounding the alarm on panic buying of toilet paper due to supply concerns. And with fuel prices reaching record highs of 190 yen ($1.20) per liter, Japan has launched subsidies on fuel products to limit gasoline prices to around 170 yen ($1.07) per liter.
Japan is better prepared than many of its neighbors for an energy crisis. And that led to the oil crisis of the 1970s.
The world economy suffered from stagflation in the 1970s, triggered by the 1973 oil crisis. After the Yom Kippur War, Arab oil producers cut supplies and raised prices. Oil prices nearly quadrupled within months, shocking import-dependent economies like Japan.
The impact was severe. Japan relied on imports for almost all of its oil, and the postwar economic boom suddenly stalled. As panic buying spread, Japan’s economy contracted for the first time since the war in 1974, and growth began to slow.
The second shock, the oil crisis of 1979, caused prices to rise again. But by then, Japan had begun to adapt, investing in energy efficiency, diversifying energy sources, and building strategic reserves.
