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Japan's Idemitsu will shut down a refinery in 2024 in response to an anticipated decline in gasoline demand, Nikkei has reported.
The report noted that the expected decline in demand appears to be the increase in the number of more energy-efficient vehicles; that is, the Japanese are driving more EVs.
Idemitsu, which is the second-largest oil wholesaler in Japan, reported a record profit for its latest financial year, which ended in April, thanks to the oil price rally.
"We have achieved our record profit, but it's hard to be enthusiastic about the result...as major contribution comes from higher oil prices," the company's chief executive, Shunichi Kito, said, as quoted by Reuters.
"We must expand our initiatives toward decarbonisation while providing the stable supply of energy without making any mistakes in the timeframe," Kito added.
The same oil rally prompted the Japanese government earlier this year to increase subsidies for refiners such as Idemitsu. Retail gasoline prices hit a 13-year high in March following Russia's invasion of Ukraine. This also forced the government to consider additional measures to tame prices, including a reduction in the national gasoline tax.
The rally in Japanese gasoline prices, however, was not a result of the war in Ukraine. Prices had been on the rise for months previously, with the government in November extending financial help to refiners to reduce the burden of high crude oil prices and to prevent them from passing this coast onto drivers.
Idemitsu's decision to reduce its refining capacity comes at a time when global refining capacity is also shrinking, which some, including the Saudi energy minister, have noted as one reason for the current fuel price rally.
"There is no refining capacity commensurate with the current demand and the expectation of the demand in the summer," Prince Abdulaziz bin Salman said at an industry event last month.
By Charles Kennedy for Oilprice.com
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Charles is a writer for Oilprice.com