Japan sees oil use falling

12/14/2011
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TOKYO (majirox news) — Statistics about pig iron, frozen pork bellies and crude oil refining are not in themselves interesting. But when Japan’s Ministry of Economy, Trade and Industry (METI) announces that in only 10 years, Japanese crude oil refining dropped 20 percent, it is time to sit up and take notice. Furthermore, when METI predicts that Japanese crude oil refining will probably drop another 20 percent by 2014, it is time to ask what’s going on.

Crude oil is processed and refined in Japan into more useful petroleum products, such as gasoline, diesel fuel, asphalt base, heating oil, kerosene and liquefied petroleum gas.

Everyone knows that the high yen is pummeling Japan’s car production and ability to export.

“We must recognize the magnitude of the super-strong yen,” said Executive Vice President Satoshi Ozawa of Toyota Motors at a news conference Dec. 9.

Cars are not only about exports: they are also the prime mover of Japan’s internal economy. And the prime mover to power these cars is gasoline. Gasoline refiners in Japan (Japan imports no gasoline) are looking at nothing less than a collapse in the amount of gasoline people are buying to put in their cars. At the same time, purchases of kerosene, an important heating product in Japan and heavy bunker oil used to power ships and large scale generators, are plummeting.

Juanita Phillips, a chemical engineer with a major American wood pulp corporation, says, “Part of the major shift in Japan is to a more ecological means of transportation and energy generation. Also, the rapid shrinking of Japan’s population is making itself felt in gasoline and kerosene sales.”

Japanese automobile manufacturers, particularly Toyota, are adamant about maintaining automobile production in Japan. But in the face of falling consumption, there is more manufacturing of mini cars (keijidosha in Japanese), which consume only a fraction of the fuel that full-size family sedans do.

When one goes out into the countryside, the vast majority of cars one sees are tiny keijidosha. Other than taxis and some bigger cars in the cities, regular size sedans are disappearing from the roads to be replaced almost entirely by keijidosha with engines a little larger than motorbike engines.

Even with keijidosha added into the mix, there are fewer new cars being registered every year, and fewer and fewer drivers on the road. Aging takes its toll as bad eyesight and other problems reluctantly force older drivers to get out from behind the wheel and rely on public transportation.

The sheer number of cars on the road in Japan is caught in an increasingly downward spiral. While automobile makers fight with every weapon in their arsenal to maintain market share, the market is getting smaller every year.

In addition, as Japan’s population ages, they tend to travel less and move to smaller apartments instead of houses, cutting down on fuel bills. As Japan’s population rapidly decreases, the consumers aren’t there.

“So at this point, the efficiency of Japan’s refining facilities is becoming a question,” says an METI official. Japan is among one of the top ten countries in the world for a chemical industry and its petroleum refining is important in East Asia.

In 2000, roughly 23.5 billion liters of gasoline and gasoline related products, such as kerosene, were refined in Japan. By 2010, this had dropped to around 19.6 billion liters of gasoline type products. By 2014, METI believes that it will be in the range of around 16 billion liters of fuel.

As ever, when in a bind, Japanese industry’s first thought is to turn to export.

Phillips says, “Crude oil is a base product from which you can get an infinite amount of products. Converting from making gasoline or kerosene to making the raw feed stock for polystyrenes, artificial fabrics of all types, as well as the material for pet bottles once you have the refinery set up and going is a natural choice.”

Japanese oil firms have now linked up with Korean oil firms in much the same bind: an aging, falling population with increasingly energy efficient automobiles and heating systems causing a fall in demand for products from South Korean refiners. Using basic feedstock from Japan, South Korean refiners in conjunction with Japanese firms have joined hands to create new refineries in South Korea to make the basic feedstock for a multitude of plastics.

“People tend to not realize how ubiquitous artificial fabrics are,” Phillips points out. “Every pack of baby diapers and every single felt tip marker are made out of petroleum based artificial fabrics. For that matter, in the case of the felt tip markers, the casing and the very ink itself are all petroleum based.”

Unlike so many other fields, where South Korean and Japanese firms are in competition, petroleum refiners in South Korea and Japan, facing a similar crisis for similar reasons, are increasingly cooperating to jointly manufacture and distribute products. However, they both share a similar fallacy or fascination: they believe that they can maintain production by exporting to the Newly Industrialized Exporting States (NIES) such as Brazil, India, Vietnam, and particularly China. But how long before Chinese refining capacity finally catches up with Chinese demand?

Whether it is in cars, ships, electronic products, refining petroleum, agriculture or any of another myriad of fields, Japan is in the same situation that other developed nations have been in: Developing nations can do it cheaper and probably just as well. But today, exports are no longer the sole answer. It is how to maintain production, employment and an industrial resource that is one of the bases of Japan’s prosperity.

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