Japan will release part of its state-owned oil reserves for the first time, Prime Minister Fumio Kishida told reporters on Wednesday.
Made in response to calls from the United States, the move is aimed at temporarily increasing oil supplies to curb price hikes in gasoline and other petroleum products. Britain, China, India and South Korea also will cooperate in the initiative.
The price on the U.S. crude oil market rose on Tuesday, however, due to the prevailing view that these efforts will have only limited success in improving the balance between supply and demand.
"Stabilizing the price of crude oil is extremely important in achieving a recovery in the pandemic-hit economy," Kishida said at the Prime Minister's Office.
The government plans to hold a tender as early as by the end of this year and to sell the oil by the end of March 2022.
About 4.2 million barrels will be released, equivalent to two to three days of domestic demand. The government will consider releasing more if necessary.
In addition to the state-owned holdings, private oil companies are also required to reserve a certain amount of oil.
The Oil Stockpiling Law stipulates that the state needs to reserve an amount equivalent to 90 or more days of import volume, while the private sector has to reserve 70 or more days of consumption volume.
As of the end of September, the state oil reserves totaled 280 million barrels, about 145 days of domestic consumption, and the private-sector oil reserves totaled 170 million barrels, about 90 days of domestic consumption.
The law stipulates that oil reserves can only be released in emergencies, such as a shortage of supply from overseas or a shortage of gasoline or kerosene in times of disaster. It was not envisaged as a means to curb oil prices.
The government decided that the amount of oil in excess of the required minimum can be released without legal issues.
Some of the private-sector oil reserves have been released five times, including in 1991 during the Gulf War and in 2011 following the Great East Japan Earthquake.
Prior to Kishida's announcement, U.S. President Joe Biden said in a speech on Tuesday, "This coordinated action will help us deal with the lack of supply, which in turn helps ease prices." He added, "It will take time, but, before long, you should see the price of gas drop where you fill up your tank."
The U.S. government will release a total of 50 million barrels of oil from the Strategic Petroleum Reserve over a few months starting in mid-December. This is about 8% of the SPR, and equivalent to about three days of U.S. consumption. Biden said it is "the largest-ever release from the U.S. Strategic Petroleum Reserve."
The British government said on Tuesday that it would release 1.5 million barrels of oil, while India announced its plan to release 5 million barrels from the country's oil reserve.
On Tuesday, West Texas Intermediate for January rose 1.75, dollars or 2.3%, to settle at 78.50 dollars per barrel on the New York crude oil futures market. WTI dropped from the 80 dollars range to the 76 dollars range last week, reflecting plans for the release of oil stockpiles.
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