I guess this is because they see a huge oil glut in the future!
May 19, 2006 05:27 AM ET
Japan May Increase National Oil Reserves
Associated Press
All Associated Press News
TOKYO (AP) - Japan is considering a five-day increase in its national oil reserves to 95 days, the trade minister said Friday, moving to boost the resistance of the world's second-largest economy to wide swings in energy supplies.
The step is being considered as a ministry draft report on oil policy recommended Japan also diversify its reserves from just crude oil, which needs to be refined to be used, to already refined products such as gasoline and kerosene.
Trade Minister Tohihiro Nikai did not say when the government could increase the oil reserve from the current 90 days of domestic consumption.
Nikai said that the proposed increase in the reserves would amount to roughly 15 million barrels of oil, costing an estimated 100 billion yen ($900 million).
Japan currently has 320 million barrels of oil as national reserves, according to the ministry.
The draft report, compiled by a panel of oil experts and industry officials, suggested that the boost to the state's oil holdings could come from private reserves, and therefore would not affect the oil supply to the economy or increase prices.
"Basically there will be no impact on the market," said Yasuhiko Nagata, researcher at the Institute of Energy Economics, Japan. "If we need to buy extra oil, there will be an impact on the market, but this just means that there will be a change in who has control."
A similar oil policy panel last August recommended reducing the private reserves target to between 60 days and 65 days. Private reserves currently are at 78 days' worth, above the 70 days target under Japan's law, the trade ministry said.
The report recommended an increase in national reserves to match increases in other countries.
While Nikai gave no reasons for the increase, Nagata said it would allow the government to better respond to natural disasters that affect oil production, such as Hurricane Katrina.
The report also suggested that Japan, which relies 90 percent of its oil from Middle East, diversify its sources of supply to Russia and African, South American countries.
Ministry official Keiichi Hakozaki said that the proposal to stock up on refined products only is under ministry consideration. It was not immediately clear how soon the ministry is expected to reach a decision.
On Thursday, Japan's business daily Nihon Keizai reported that Japan may increase its national oil reserves to the equivalent of about four months' worth of domestic consumption, or a 40 percent increase over current levels.
Government officials denied the Nikkei report.
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