FINWIRES · TerminalLIVE
FINWIRES

Redirecting Gasoline Subsidies to EVs Could Improve Japan's Energy Security, IEEFA Says

By

Japan could strengthen energy security by accelerating electric vehicle adoption and reducing oil demand rather than seeking new crude suppliers, the Institute for Energy Economics and Financial Analysis said Tuesday.

To limit supply disruptions, Japan has released oil reserves, pursued alternative crude imports, and subsidized domestic fuel wholesalers, yet the country still sourced 94% of its oil imports from the Middle East in 2025 despite spending more than 9 billion Japanese yen ($56.3 million).

Although Japan cut annual crude oil consumption by 40% between 2000 and 2024, oil still accounted for 34.5% of primary energy supply in 2024 and remained high relative to other Group of Seven economies, IEEFA said.

Utilities drove much of the decline in oil use, with fuel-oil consumption falling 69.3% from its 1994 peak to 2023 as power producers shifted away from oil-fired generation following energy-market reforms, rising costs, and greater use of liquefied natural gas and renewable energy.

Kerosene demand dropped more than 62% between its 2000 peak and 2023 as electric heating systems gained popularity, building efficiency improved, and warmer winters reduced consumption, leaving usage concentrated mainly in the Tohoku region, the report said.

Transportation remains a major source of oil demand, with gasoline, diesel, and jet fuel accounting for 27%, 24% and 8% of petroleum-product consumption in 2023, while gasoline use fell 27.8% from its 2005 peak and diesel demand declined 26.5% from its 1997 peak.

Japan has explored new crude sources by discussing investments in Alaska in March 2026 and agreeing to import 1 million barrels from Mexico a month later, but IEEFA said that falling production in both regions could limit meaningful supply growth.

Alaska's oil production fell 80% between 1988 and 2025 and may require up to a decade to deliver significant new output, while Mexico's crude production declined by more than 50% between 2004 and early 2024.

A more effective way to strengthen Japan's energy security would be to reduce domestic oil consumption by accelerating transport electrification, as replacing disrupted imports would still leave the country exposed to global oil price swings.

Japan has targeted 300,000 EV charging sites by 2030 and aims for electrified vehicles to account for 100% of new passenger-vehicle sales by 2035. EV charging locations have already increased by 41% over the year to 68,000 sites as of March 2025, IEEFA said.

Japan allocated 129 billion Japanese yen for EV purchases in fiscal 2024 and another 5.5 billion Japanese yen to support charging and energy-storage equipment, IEEFA said.

The report said Japan spent 6 trillion Japanese yen on gasoline subsidies between 2022 and 2024, compared with 171 billion Japanese yen for EV purchases and charging infrastructure, and argued that redirecting more funding toward EV incentives, battery production, and the used-EV market could reduce oil dependence and improve long-term energy security.

Japan's EV adoption remains the slowest among Group of Seven countries, with electric vehicles accounting for just 3% to 4% of new passenger-vehicle sales between 2022 and 2024, IEEFA said.

Japan should shift part of its gasoline-subsidy spending toward EV purchases, charging infrastructure, and domestic battery production to lower vehicle costs and accelerate the electrification of transport, IEEFA said.

The report also urged policymakers to strengthen the used-EV market, noting that about 80% of unsold used EVs are exported, while arguing that broader EV adoption would reduce crude-oil dependence and improve Japan's energy security.

Related Articles

Commodities

Market Chatter: European Commission Discusses Temporary Fiscal Exemption for Energy Spending

The European Commission is considering a temporary fiscal exemption that would let member states direct about 0.3% of gross domestic product toward energy support measures, Bloomberg reported Monday, citing people familiar with the discussions.To help governments manage rising energy bills, European Union officials are discussing plans to exclude certain energy-related spending from the bloc's fiscal rules, according to the report.The proposal would follow the model of the defense carve-out previously approved by the Commission.Among the strongest advocates of additional fiscal flexibility, Italy has pressed for relief as elevated energy costs add pressure to a country already burdened by high debt levels.The proposal remains under discussion and key details could still change before any announcement, while the European Commission has not yet made a final decision.European Commission didn't immediately respond to' request for comment.(Market Chatter news is derived from conversations with market professionals globally. This information is believed to be from reliable sources but may include rumor and speculation. Accuracy is not guaranteed.)

Commodities

US Natural Gas Update: Prices Drop on Reduced Cooling Demand

Natural gas futures remained under pressure in after-hours trading Monday as weather forecasts indicated little additional warming through mid-June, dampening expectations for stronger cooling demand and limiting price support.Both the front-month Henry Hub contract and the continuous contract fell 3.13% to $3.187 per million British thermal units.Updated forecasts pointed to cooler weather in parts of the eastern US during June 6-10, although above-normal temperatures are still expected across the northern two-thirds of the country during June 11-15, according to a note from Aegis Hedging.Forecasts now show temperatures tracking close to the 10-year average through the outlook period, with nationwide averages expected to plateau near 75 degrees Fahrenheit during the second week of June. Cooling degree day expectations have also leveled off at roughly 10 per day by mid-month, Criterion said, according to Aegis.Ample supplies and muted demand expectations largely offset support from overseas geopolitical developments. Iran suspended talks with the US, saying it would not return to negotiations unless Israeli strikes against Lebanon cease. The development helped lift European natural gas prices by 6%.In the US Lower 48, dry gas production was estimated at 107.5 billion cubic feet per day on Monday, down 3.1 Bcf/d from Friday but up 0.3% from a year earlier, Barchart reported, citing BNEF data. Aegis said market participants viewed the decline cautiously, noting it may reflect first-of-the-month pipeline nomination adjustments, with a clearer production picture expected later in the trading cycle.Trading Economics reported that Lower 48 gas production averaged 109.4 Bcf/d in May, slightly below April's 109.8 Bcf/d average.Demand showed some improvement. Lower 48 state gas demand reached 69.7 Bcf/d on Monday, up 2 Bcf/d from Friday and 10% higher than a year ago, according to Barchart.Power-sector consumption also strengthened. Celsius Energy said power burn totaled 23.6 Bcf on Monday, up 4.1 Bcf from Sunday and 3.8 Bcf above year-ago levels. Natural gas accounted for 38% of the US power generation fuel mix, up 1.1 percentage points from a year earlier.Meanwhile, estimated net feedgas flows to US LNG export terminals were 17.8 Bcf/d on Monday, down 0.7 Bcf/d from Friday and 3.3% lower than the previous week. Aegis said nominations into the Sabine Pass export facility declined as pipeline outages affected several systems serving the terminal.US LNG exports remained subdued, according to Vortexa. Weekly LNG loadings totaled 2.3 million metric tons across 32 cargoes, unchanged from the prior week. Planned maintenance at the Freeport and Cameron export terminals has continued to weigh on output, while the new Golden Pass facility has not loaded a cargo in more than three weeks. However, the QatarEnergy-controlled tanker Barzan is expected to arrive this week to load what would be Golden Pass's third cargo, Vortexa said.

Commodities

US Retail Fuel Margin Indicator Falls to Lowest Level Since 2021, TPH Says

Higher crude oil and refining costs pushed TPH Energy's US retail margin indicator down 11 cents per gallon in May, even as gasoline prices continued to climb, TPH Energy said in a Monday note.Pump prices increased 38 cents per gallon from April to $4.48 per gallon, the highest monthly average since July 2022, but higher refining margins and crude costs more than offset the increase, TPH said.Refining margins rose 33 cents per gallon during the month, while crude costs increased 13 cents per gallon as the Iran conflict and seasonal trends lifted fuel input costs, according to the note.The retail margin indicator fell 11 cents per gallon from the first quarter and reached its lowest level since the first quarter of 2021, TPH said.The PADD 4 retail margin indicator increased 11 cents per gallon from the prior quarter as retail fuel prices in the region climbed $1.29 per gallon.The PADD 2 retail margin indicator declined 17 cents per gallon from the prior quarter, while the PADD 1 indicator fell 15 cents per gallon and the PADD 5 indicator decreased 5 cents per gallon, according to the note.Among companies covered by TPH, Par Pacific Holdings (PARR) has the greatest exposure to retail fuel margins through its service station operations in Hawaii and Washington, the report said.The trend could also affect wholesale fuel marketing activities at Phillips 66 (PSX) and HF Sinclair (DINO), according to TPH.

$DINO$PARR$PSX