IEEJ：January ©IEEJ 2023
Special Bulletin
A Japanese Perspective on the International Energy Landscape (618)January 2, 2023

2023 Global and Japanese Energy Outlook
Ken Koyama, PhD
Chief Economist, Managing Director
The Institute of Energy Economics, JapanThe New Year 2023 opened after a historically turbulent 2022 due to the impact of theUkraine crisis. In the following, I would like to share my views on the outlook for the global andJapanese energy situations in 2023 while referring to my overview energy outlook for 2023, as wellas nine energy market forecasts published by the Institute of Energy Economics, Japan, on
December 27, 2022.
First, I would like to note that the international energy market will remain unstable in 2023,
plagued with the risk of serious price hikes and tighter supply-demand balances. This is common to
all energy sources, ranging from oil and natural gas to liquefied natural gas, coal and electricity. The
biggest focus of attention is the possibility that the European gas and global LNG markets could see
a tighter supply-demand balance, price hikes, and physical gas shortages in the worst case. Europeangas inventories will substantially decrease by the early spring of 2023. While inventory build-ups
remains difficult, the tightening of the supply-demand balance may lead to a fierce race to procure
LNG as an alternative to reduced gas supplies. Crude oil and coal market prices have the potential torise depending on unexpected supply disruptions, demand for oil or coal as an alternative to gas
amid gas price spikes, and oil production policy decisions by the OPEC-plus group of oil producing
countries. Meanwhile, global economic risks are serious. If the global economy decelerates greatly,energy demand may slow down or decline, exerting downside pressure on energy prices. On thedemand side, China’s economic trends attract attention. At a time when COVID-19 infections are
increasing explosively on the reversal of zero-COVID policies in China, Chinese energy demandchanges are expected to have great influence on the international energy supply-demand balance in
2023. If the Chinese economy picks up to boost energy demand, energy prices may be pushed up.
There are numerous destabilizing factors that could move international energy prices in 2023.
Second, energy security will remain a focus of global attention in 2023 under theabovementioned international situation. Particularly, energy security enhancement initiatives inEurope on the energy crisis front line will attract attention. As well as the European promotion ofnon-fossil energy sources like renewable and nuclear energy to phase out dependence on Russianenergy supply, European moves to secure non-Russian energy supply such as LNG will exert great
influence on the international energy situation. In addition, energy security policies in developing
and emerging countries plagued with high energy prices and the U.S. Biden administration’s energy
security strategy after the midterm congressional elections will attract attention. Governments will
step up measures to enhance energy security and counter high energy prices. While market forces
remain important, governments may enhance engagement with, control on, and intervention ininternational and domestic energy markets in 2023.
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Third, nations around the world will continue to emphasize responses to climate change,
focusing on decarbonization initiatives. Amid the current high energy prices and market
destabilization, however, a global trend to give priority to stable energy supply may run counter todecarbonization. Such trend may be conspicuous in Europe, which is facing concern about a serious
energy crisis, and in developing countries plagued with high energy prices. Amid the trend,international climate change negotiations like the 28th Conference of Parties to the United Nations
Framework Convention on Climate Change may see the escalation of north-south confrontation,
plunging debates on how to maximize global interests into a deeper chaos. Meanwhile, some energy
security enhancement measures feature initiatives to promote the phaseout from fossil fuels,including the European Union’s REPowerEU plan. Developed countries may intensify suchinitiatives. Given high energy prices and worse economic conditions, however, whether suchinitiatives would make smooth progress in 2023 is uncertain.
Fourth, geopolitical tensions are expected to remain high in 2023, deepening the divisionof the world. U.S.-China confrontation, which has been a serious issue regarding internationalpolitics and security since before the Ukraine crisis, has developed into confrontation between theWestern bloc and the China-Russia axis through the crisis, prompting the two sides to launch andescalate a tug-of-war to attract third-pole countries. The division of the world has thus deepened. As
noted above, the north-south confrontation over climate change has also become serious,
demonstrating a different division of the world. Such geopolitical tensions and the division of theworld are unlikely to ease in 2023. Rather, they are feared to take root or escalate. While Russian
issues have become a matter of grave concern to the world regarding geopolitical tensions, issues
over the Middle East as the gravity center of supply in the international energy market are too
important to ignore in 2023, which marks the 50th anniversary of the first oil crisis. We must pay
attention to the future of special relations between the United States and Saudi Arabia and to theIranian situation. The geopolitical situation for Asia as the leading energy consumer and importer isalso important. Furthermore, we must closely watch trends in China amid explosive COVID-19
infections after the reversal of zero-COVID policies and in India and the Association of Southeast
Asian Nations as the next driver of global energy demand growth.
Fifth, Japan’s leadership will be important for the Group of Seven Hiroshima Summit in2023, which is set to debate how to stabilize the world and pursue global interests under theinternational situation described above. The escalation of the Ukraine crisis has led some countries
to focus on their own energy security without considering international market stability. Given suchsituation, the G7 Hiroshima Summit will have to discuss how to stabilize the international energy
market and maintain its order for global stability. It is important for the seven industrial democracies
to promote investment required for market stabilization and reaffirm the significance of international
cooperation in avoiding any zero-sum game competition for energy sources. As the only Asian
member of the G7, Japan should represent Asian voices to reflect Asian realities regarding energy
security and decarbonization in G7 talks. Japan should also promote talks between energy producing
and consuming countries and emphasize the significance of inclusive decarbonization initiatives.
Sixth, it must be noted that 2023 will become an extremely important year for Japan’s
consideration of a comprehensive energy policy. To achieve the 2030 energy mix goal, Japan should
accelerate all relevant efforts. In 2023, it is questioned how Japan should materialize basic policies
given at the Green Transformation Implementation Council in late 2022. Among them, the nuclear
energy policy, including the restart of more nuclear reactors, the reform of a system for extending
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nuclear reactors’ service life, and the replacement of nuclear power plants with next-generation
reactors, will be important for achieving the 2030 goal and significant for a longer term. As talks arelikely to start in 2023 on the next revision of the Strategic Energy Plan, Japan will be required to
fully consider a comprehensive energy policy to simultaneously pursue energy security anddecarbonization in view of new domestic and global situations, including the emphasis on energy
security, geopolitical tensions and the division of the world.
Considering how the global and Japanese energy situations, including the abovementioned
points, will develop, I would like to follow relevant developments through this essay in 2023 as well.

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