NAGOYA - The worsening situation in the Middle East is beginning to affect Japan’s automotive sector, with shortages of engine oil and other lubricants emerging alongside rising prices, creating mounting pressure across the industry.
Lubricants such as engine oil and brake oil are produced by petroleum refiners and oil manufacturers before being distributed through a complicated supply chain involving authorized dealers, trading houses, and wholesalers before finally reaching auto repair shops and retailers.
In some cases, products pass through as many as three separate trading companies before arriving at automotive service businesses. While repair shops and retailers have increasingly reported shortages, the government maintains that production volumes of engine oil and related products remain roughly in line with last year’s levels, indicating that supply exists at the manufacturing stage.
Authorities instead believe the problem lies in distribution. According to the government’s analysis, purchasing volumes exceeding those of the previous year have caused uneven supply flows and delays in deliveries. Some trading firms are reportedly seeking to secure larger quantities than last year, contributing to localized shortages being felt at the retail and repair level.
Attention is also focused on fuel prices. The latest figures show regular gasoline averaging 169.4 yen per liter nationwide, while prices in Aichi Prefecture stood at 162.9 yen. The lower prices in Aichi are believed to reflect intense competition due to the region’s large number of vehicles.
At the same time, the government’s gasoline subsidy program has less than 1 trillion yen remaining in its budget, and at the current pace analysts warn the funds could be exhausted before summer. If subsidies are reduced or eliminated, gasoline prices could rise further.
Additional upward pressure may also come from changes in Japan’s crude oil procurement strategy. More than 90 percent of Japan’s crude oil consumption last year depended on the Middle East. Following the attack on Iran in April, Japan compensated for reduced Middle Eastern imports by releasing oil from national reserves to avoid disruptions in overall consumption.
In May, Japan increased procurement from Middle Eastern producers that do not rely on the Strait of Hormuz, while also expanding imports from the United States, reducing the need for reserve releases. For June, the share of crude oil sourced from the United States is expected to rise further.
However, transporting crude oil from the United States involves far longer shipping distances than imports from the Middle East, increasing transportation costs and making it unlikely that crude prices will fall significantly.
Against this backdrop, attention is turning to the upcoming summit between the United States and China. With China maintaining close ties to Iran, markets are closely watching what discussions may take place between Chinese leaders and President Donald Trump during talks scheduled for May 19th.
Source: CBC
