Business | Oil & Gas
Switch from oil-fired power will see Japan demand drop by 2.4%
Japan's oil demand is expected to fall 2.4 per cent in the year starting next April, a more moderate drop than this year as an expanding economy offsets a switch away from oil-fired power, a top energy forecaster said.
- Reuters
- Published: 00:00 December 15, 2006
Tokyo: Japan's oil demand is expected to fall 2.4 per cent in the year starting next April, a more moderate drop than this year as an expanding economy offsets a switch away from oil-fired power, a top energy forecaster said.
Oil product sales in the world's third-biggest consumer are expected to total 222.43 million kilolitres (1.4 billion barrels or 3.8 million bpd) in the 2007-08 fiscal year, the Institute of Energy Economics, Japan said in a report.
That will mark the fifth straight year of declining demand, a trend that is not expected to end soon as the ultra-efficient economy pushes more fuel-saving measures and the population shrinks. Weak domestic demand is forcing refiners to consolidate or invest billions of dollars in export-oriented upgrades.
Demand is falling as high oil prices prompt industrial users and power firms to switch off oil-fired generators and switch to buying electricity from the grid or using natural gas, said Shigeru Suehiro, senior economist at IEEJ.
Sales in the current fiscal year to March 2007 are set to fall 3.5 per cent from last year to 228 million kilolitres, it added.
"Electricity use is growing in large firms because it's cheaper than...in-house generation," Suehiro said.
He also said that Jap-anese homeowners, who burn as much as 1 million barrels per day (bpd) of kerosene for heating during the height of winter when demand spikes, were increasingly turning to electricity for their heating needs.
Demand for electricity is set to grow 2.4 per cent in the next fiscal year, building on a 1.8 per cent rise this year, as the economy grows, the IEEJ said. Demand for utility gas is set to grow a stronger 5.5 per cent in 2007-08. Japan's economy, which had been largely stagnant over the past decade, is expected to grow 1.9 per cent in the current fiscal year, followed by 2.0 per cent growth projected next year, a Reuters survey showed.
The IEEJ forecasts assummed a US crude oil price averaging around $60-$65 a barrel. US frontmonth crude was trading at $61.65 a barrel yesterday.
Domestic sales of gasoline, which make up about a fifth of the country's fuel use, are projected to slip 0.6 per cent next fiscal year following a 1.1 per cent decline in the current year amid strong demand for small cars and improved fuel economy.
Oil traders said demand this year was particularly weak due to a rainy, mild summer season that deterred holiday driving and limited the need for fuel-intensive air conditioners.
Sales of other consumer fuels such as kerosene, gas oil and fuel oil also are set to fall again next fiscal year, the IEEJ said.
Naphtha sales, however, are seen rising 0.7 per cent after a projected 0.3 per cent decline this year due to a rise in the output of ethylene, a basic building blocks for the chemical sector.
Tanaka to replace Mandil
Japan's Nobuo Tanaka will succeed Claude Mandil of France as the next head of the International Energy Agency, the IEA said in a statement.
Tanaka, who is currently Director for Science, Technology and Industry at the Organisation for Economic Co-operation and Development (OECD), will take up the post as IEA Executive Director on September 1, 2007.
This marks the first time a non-European has been selected for this post at the Paris-based IEA, which acts as an energy adviser to 26 industrialised countries.
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