Japan METI Proposes Oil Import Cost Sharing to Diversify Procurement Amid Hormuz Risk

The Japanese Ministry of Economy, Trade and Industry (METI) proposed on August 7 at a working group meeting on reinforcing oil supply resilience a system under which importers would share the increased transport and insurance costs incurred to avoid the Strait of Hormuz, aiming to promote diversification of crude oil and other procurement in normal times. Under the proposal, oil wholesalers and trading houses that import crude oil and naphtha would submit procurement plans to the government, which would then conduct a comprehensive assessment of the plans' economic viability and contribution to diversification. For example, when procurement from sources farther than the Middle East increases transport and insurance costs, those additional expenses would be covered by the Japan Oil, Gas and Metals National Corporation (JOGMEC), funded by contributions collected from all importers. Extra costs arising from using loading ports in Middle East producer countries that avoid the Strait of Hormuz would also be eligible for coverage. The proposed framework will be finalized after a public comment period ending on the 22nd, with the implementation timeline and details to be further determined. A METI official acknowledged the system would increase the burden on the public, while stating that it would “smooth out the risks and costs faced in times of crisis and in normal times.