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Low crude oil prices benefit Japan

  • 2015-01-07 15:00:00
  • , Tokyo Shimbun
  • Translation

(Tokyo Shimbun: January 7, 2015 – p.3)

The downward spiral in oil prices shows no sign of letting up, with the U.S. crude oil futures market temporarily dropping to the $48 range per barrel on Jan. 6. Since low crude oil prices lead to lower gasoline prices and electric utility rates, domestic companies welcome them. However, if oil prices fall too rapidly, they could trigger a drop in stock prices for oil companies that anticipate a decline in performance or economic recession in oil producing countries. This could also affect oil field development and the dissemination of energy-saving technologies. Some business leaders have begun voicing concerns.


Low crude oil prices have contributed to a decrease in the price of oil-based products such as plastic and electric utility rates since oil is used to fuel thermal power plants. The drop in prices has benefited not only households but also companies. Yoshimitsu Kobayashi, president of Mitsubishi Chemical Holdings, said: “Crude oil used to cost $100 per barrel. This is obviously a blessing for countries that lack natural resources.”


The drop in oil prices has been caused by a decline in demand worldwide on account of the economic slowdown in China and Europe. It is also a result of oil producing countries placing priority on domestic share and not reducing their oil production. There is a view that in order to threaten the viability of shale gas, which the U.S. is producing in increasing quantities, the Organization of Petroleum Exporting Countries (OPEC) has not cut production on purpose so that the U.S. will slow down its development. Oil business circles expect that oil prices will continue to drop, with Takashi Tsukioka, president of Idemitsu Kosan Col, Ltd., saying, “The price has not hit bottom yet.”


However, if crude oil prices drop too low, oil field development may become stalled. Keizo Morikawa, the president of the Cosmo Oil Co., Ltd., expressed his concern by saying, “There are oil fields that dry up every year. Replacements must be sought.”


Following the East Japan Great Earthquake, people’s awareness of saving electricity and energy conservation has grown. Toshio Asano, president of Asahi Kasei, is concerned “New energy-saving technologies are being developed one after another, but low crude oil prices may interrupt the trend.”

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