Japan Offers Financial Aid to Oil Refiners Amid Rising Costs

(Bloomberg) -- Japan is stepping in to bear some of the burden faced by its oil refiners as higher crude feedstock costs threaten to flow through into fuel prices and inflation. 

The government plans to pay refiners up to 5 yen ($0.04) per liter of gasoline produced, according to a report by local broadcaster NHK on Tuesday. The move is likely to help processors maintain their margins without passing on rising costs to customers. 

Crude prices have surged as the roll-out of vaccinations boosted consumption, and the OPEC+ alliance has resisted calls to restore output faster. That’s prompted the cost of everything from diesel to gasoline to skyrocket, fanning inflation fears and setting off alarm bells from the U.S. to Japan. 

See also: High Fuel Prices a ‘Significant Drag’ on Global Economy: IEA

Earlier this month, Tokyo called on the Organization of Petroleum Exporting Countries and allies to raise production more quickly, citing the demand recovery and energy crisis. OPEC+, however, has argued caution is still merited.

Japan’s measures will be included in an economic stimulus package the government will finalize on Friday, NHK said. The subsidy is likely to take effect when the average price level of regular gasoline is above 170 yen per liter, the broadcaster said. Rates recently hit a 7-year high and are currently at about 166 yen.

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