Gov't mulls cost-sharing among private firms for oil bypassing Strait of Hormuz

The Japanese industry ministry is considering creating a system for oil wholesalers and trading firms to share the extra costs of importing crude through routes that avoid passing the Strait of Hormuz.

The move is aimed at diversifying procurement sources in the resource-poor nation that has long heavily relied on the Middle East for its crude oil imports, over 90 percent of which have transited the strait. But households could face higher gasoline prices if companies pass on the added costs.

The Economy, Trade and Industry Ministry on Friday presented the idea to a task force discussing ways to enhance the supply capacity of oil products. Details of the scheme will be discussed later.

It takes about 20 days to transport Middle East-produced crude oil, but around 50 days for tankers carrying U.S.-origin oil via a route that passes near South Africa’s Cape of Good Hope, creating a challenge on how to bear additional fuel and personnel costs stemming from the longer journey.

Under the proposed mechanism, the government-backed Japan Organization for Metals and Energy Security will collect a levy from oil wholesalers and trading companies. The payment will be used for funding subsidies for businesses that import oil that does not pass the Strait of Hormuz.

The effective closure of the strait in the wake of the U.S. and Israeli war with Iran that began in late February has forced the Asian nation to diversify its energy sources.

Japan has since been increasingly sourcing oil from regions other than the Middle East. The government expects imports from the United States to jump 10-fold in August from the previous year.