Taiyo Oil urges Japan to prioritize Middle East crude for cost savings

Taiyo Oil, a major Japanese refiner, is advocating for a return to sourcing most of its crude oil from the Middle East, citing cost-effectiveness as the primary reason. CEO Takahiro Yamamoto argued that Japan should prioritize low-cost procurement during peacetime while maintaining the flexibility to switch suppliers during crises. Before the US-Iran war, Taiyo sourced about 40% of its crude from the Middle East but reduced that share to roughly 15% by importing more from the US and Argentina. Yamamoto expects this share to return to 40% once conditions normalize.

Yamamoto criticized the push for diversification, stating that it imposes significant costs on society in normal times. He emphasized the importance of economic efficiency, saying, 'It's better to rely on the Middle East for more than 90% of Japan's needs.' He also highlighted the industry's ability to quickly adapt during the war, swapping in replacement barrels within about three months, demonstrating Japan's resilience without permanently shifting away from Middle Eastern crude.

The Japanese government, however, has been moving to widen its supply sources and strengthen alternate import routes to improve energy security, even if it means higher costs. Yamamoto's comments push back against making this diversification a permanent policy, arguing that it would lead to consistently higher oil prices.