For decades, Japan dominated Asia’s energy picture. At the time of the first oil shock in 1973, it held a 60 percent share of Asia’s oil demand. During the 1980s, Japan looked to China for oil and coal as part of its energy import diversification strategy. Today, Japan remains an important energy market but its position in Asia’s energy supply and demand balance is rapidly changing. In the wake of surging regional demand, Japan’s share of oil consumption is likely to fall below 15 percent of total Asian consumption by 2020. Demand for its major fuel needs—including oil, gas, coal, and uranium—is expected to remain relatively flat or increase only marginally. Meanwhile, the rest of Asia’s requirement for these fuels is projected to grow dramatically, leaving Japan to confront a future in which it will be a smaller energy player facing a more crowded field of competitors for these energy supplies.
Securing stable energy supplies from abroad and establishing the “best mix” of fuels and technology at home have preoccupied Japanese policymakers since the 1970s. This is understandable given the country’s nearly complete dependence on imported fossil fuels to drive its economy. But new realities are pushing energy security to the top of the political agenda in a way that has not been seen in more than two decades. A vigorous debate now pits those who see the country’s energy security interests best secured through market mechanisms against those who favor strategic government intervention and championing—to the extent possible—energy autonomy. The outcome of this policy debate will have significant implications for how the government intervenes in energy markets at home and abroad.
This report, a study of Japan’s energy security outlook and policymaking, was written by Peter C. Evans, Director, Global Oil, and Research Director, Global Energy Forum, Cambridge Energy Research Associates.