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EIA: Japanese refineries closing as the country’s petroleum consumption falls

In its Short-Term Energy Outlook, the US Energy Information Administration (EIA) forecasts the lowest annual petroleum consumption in Japan in 2024 since at least 1980, in part due to the country’s aging and declining population. Japan’s reduced consumption is already affecting its refining industry.

Japanese refiner ENEOS permanently closed a 120,000-barrel-per-day (b/d) refinery in western Japan in mid-October 2023, and Idemitsu Kosan plans to close a 120,000-b/d refinery in March 2024. These closures represent 7% of the country’s refinery capacity.

EIA forecasts consumption of petroleum products in Japan will decline by 3% between 2023 and 2024 to 3.3 million b/d. Japan’s petroleum consumption declined by an average 2% per year through 2022 from its peak of 5.7 million b/d in 1996, largely because of demographic and economic changes. The oil intensity of Japan’s economy, measured as barrels of oil consumed per $1,000 of gross domestic product, has been declining.


Japan’s population peaked in 2009, and the country has seen some of the slowest economic growth among OECD countries since then. In addition, the share of Japan’s population aged 65 and older was 30% as of 2022, compared with 21% in the EU, 17% in the United States, and 14% in China, according to the World Bank.

Japan’s refineries were built mainly to serve its domestic fuel needs, and they have trouble competing in international markets. These refineries are smaller and less complex than newer refineries in Asia, including China, South Korea, and India.

Complexity refers to a refinery’s secondary processing capacity, such as hydrocracking and coking, which upgrades low-value heavy fuel oil into valuable transportation fuels. More complex refineries can produce more high-value products from the crude oil they process.

Less complex refiners such as those in Japan also process lighter and sweeter grades of crude oil, which are more expensive than heavier and more sour grades. Higher yields of lower-value products combined with using more expensive crude oils makes refiners in Japan less profitable and less competitive in world markets. Complex refinery margins in Asia can be 30%–50% higher than simple refinery margins.

In its recent International Energy Outlook, EIA projects Japan’s petroleum consumption will continue to decline beyond 2024, suggesting that refiners in Japan will face additional competitive pressures.



Is it because "The oil intensity of Japan’s economy ... has been declining", or because of demographics?
Given that Japan's GDP is still growing, I would think it's the former. It seems like a prime example of how energy consumption is not a predictor of well being. Simple example: your grandmother's fridge used 10x more energy (50 years ago) than your current fridge. Which one do you think she would rather own, given a choice?


Is it because of increased efficiency or because they, as all the big economies, have outsourced most of their industry to China, India, etc.? If we calculate their oil consumption, including outsourced production and the resulting imported goods transport, I think it wouldn't show any fall at all.
The example of the fridge is counterintuitive, as per Jevons' paradox that grandmother would now use the same energy, to power even more machines, electronics and so on.


I guess you can argue that a more efficient fridge would lead someone to buy many other things, in order to bring their electricity bill back up... I don't think there's a direct correlation. The trend probably goes the other way: new electronics tend to consume very little energy compared to old-school energy hogs.



Japan's GDP has been essentially static since the 1990's, not growing:


Dave, granted, but their oil intensity has been declining. So they spend less on oil, and more on other things, which is a net benefit.
That's why GDP isn't a great measure: a giant grease fire increases GDP by a substantial amount, but it negatively affects people's standard of living.

We all remember Japan's predicament in the 1990s: huge oil dependency, and a real estate bubble. That was great news for GDP, but it's hard to argue that people were better-off because most of their paychecks went to rent and energy.

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