METI Tells Oil Refiners To Charge Below-Market Prices; Consumer Subsidies Raised

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Source: https://www.fccj.or.jp/event/asa-kaiHere is a video of a panel discussion on the economic impact of the war in Iran on Japan, China, and the rest of Asia. It was hosted by Anthony Rowley of the Foreign Correspondents Club of Japan (FCCJ). It begins with a discussion of developing Asia, followed by my views on Japan (at minute 29:15), then a presentation on China, and finally a discussion among Rowley and the panelists at minute 53:38.For the video, click here.Price Suppression by the Government On Mineral FuelsIn a desperate attempt to prevent households and industries from automakers to airlines, from feeling the effects of a price spike in mineral fuels, the Ministry of Economy, Trade, and Industry (METI) has instructed oil refiners to swallow the increasing cost of crude by charging below-market prices. This is being done via “administrative guidance,” which, though not legally binding, is usually obeyed by companies. We’ll see if they can or will comply this time. It may depend on how long the conflict lasts and how much damage is done to facilities.METI is telling refiners not to use their traditional benchmark, Dubai, to set prices, but the Brent benchmark prevailing in Europe. Japanese and other Asian refiners use the Dubai benchmark because Japan gets 90% of its crude from the Middle East. Normally, there is little difference among the three main benchmarks—Dubai, Brent, and Texas—but now there is. As of March 27, Texas (WTI) futures were at $101 per barrel, Brent at $106, and Dubai at $129.While refiners can switch benchmarks, they still have to pay the hig…