On both energy security and environmental grounds, reducing oil consumption and diversifying supply are appropriate goals for the Government. The report draws particular attention to the structure of petroleum taxes, which appears to offer protection to the refining industry, in competition with imports. The report also examines the liberalisation of the market for petroleum products in Japan. Gasoline prices have been lowered by liberalisation, and a major restructuring has resulted in the distribution of petroleum products. We think that further change is inevitable as retail margins are too low to support the number of retail outlets.
Natural gas is a high cost fuel in Japan.
Unlike other IEA Member countries, gas is not an obvious means for Japan to meet energy demand with an acceptable environmental outcome. The report discusses measures, including third party access and better gas load management, which might be considered to improve the performance of the gas market, simultaneously enhancing security and environmental objectives. The report recommends that the focus of policy should be on meeting the real needs of coal mining regions in Japan, rather than on domestic coal production as a contribution to energy security or supporting the development of coal technology. Efforts should continue in the meantime to achieve the Government's goal of abolishing subsidies by 2001.