A maverick Japanese oil company has failed in an attempt to break a long-standing informal ban on importing gasoline into Japan, but says it will try again soon.
Lions Petroleum Co. brought a tanker carrying 800,000 gallons of premium gasoline refined in Singapore to Kobe in December, intending to price it below domestic brands at neighborhood filling stations.
But following pressure from the company's bank and the Ministry of International Trade and Industry (MITI), it abandoned the plan and sold the shipment to a refinery for reprocessing, according to company President Taiji Sato.
MITI contends that the cheap fuel could have helped disrupt price stability in a strategic commodity and put further pressure on Japan's seriously ailing refining industry.
Last year, the government went on record favoring the liberalization of petroleum product imports, officials say, but wants it to come slowly to assure stability during the transition.
But Sato rejects these arguments. "If I can get financial support, I'm willing to try it again," he said. "If I had a sponsor, an American bank, for instance, I would be ready to proceed." He said he planned to return to Singapore later this month to negotiate another purchase.
Sato's move, which he said he planned for 18 months, is highly unusual in Japan, where large and small companies alike generally play according to rules set by gentleman's agreement and government guidance.
Today, the action drew condemnation from the Petroleum Association of Japan, which links the country's 29 oil refining companies. Its president, Yasuoki Takeuchi, told a press conference that any imports should be handled by association members, not outsiders like Lions.
Sato's attempt also has drawn attention to the strict controls and protection that Japan maintains for some industries that are not internationally competitive, despite much-publicized steps toward liberalization of imports in recent years.
Japanese consumer spokesmen, meanwhile, have criticized the government for blocking the introduction of lower-cost gasoline.
Sato said that the lower prices charged by the Singapore refinery would have allowed him to sell the fuel to motorists in Japan for about 10 cents per gallon cheaper than domestic gasoline.
With virtually no oil resources of its own, Japan imports about 4 million barrels of petroleum per day. Eighty percent of it is crude oil. Refined products that are allowed in center on naphtha and fuel oil.
Japan's highly mobile society consumes about 9 billion gallons of gasoline per year, all of it refined in Japan. There is no formal ban on imports, but because of "administrative guidance" from MITI and consensus within the industry, none comes in.
Japan invested heavily in refineries in the 1970s. But the two oil shocks of the decade left it with much idle capacity. Many of the 29 refining companies are ailing badly, with government encouraging mergers to create units that are more viable financially.
Domestic prices are not formally controlled. But an elaborate structure has emerged in which prices remain stable, with gasoline selling at a comparatively high price to allow cheap prices for kerosene, an important home-heating fuel here.
Meanwhile, Japan has come under fire from the International Energy Agency for the product import controls. During a visit to Tokyo earlier this month, IEA Executive Director Helga Steeg stressed the need for freer flow. However, Foreign Ministry officials say she did not specifically comment on the Lions case.