Japan Gasoline Prices:

 https://mainichi.jp/english/articles/20211013/p2g/00m/0bu/045000c

Article:

TOKYO (Kyodo) -- The average retail gasoline price in Japan climbed to its highest level in seven years earlier this week, reflecting a recent global surge in crude oil prices, the Ministry of Economy, Trade and Industry said Wednesday.

The average price for regular gasoline stood at 162.10 yen ($1.4) per liter as of Monday, advancing 2.10 yen from Oct. 4 and hitting its highest level since October 2014, according to the ministry.

The rise is expected to deal a blow to household spending in Japan amid speculation that domestic travel will increase after the latest COVID-19 state of emergency through Sept. 30.

The upward trend in the average kerosene price, which stood at 1,814 yen per tank, or 18 liters, on Monday for the sixth straight weekly gain, may also hurt households going forward as heating demand increases during the winter months.

Crude oil prices have been advancing due to speculation that a reduction in COVID-19 cases across the globe and subsequent economic recovery will lead to an increase in demand. However, their climb can lead to a rise in raw material costs, squeezing corporate profits.

Gasoline prices are projected to continue rising through next week, according to the Oil Information Center, which expects crude oil prices to remain high and influence retail prices.

The surge in crude oil prices over the past few weeks has raised fears over increasing inflation and stirred uncertainty over the global economy.

Ideas:

Energy prices such as oil, gas, kerosene or even coal, tend to be very volatile, meaning they can fluctuate a lot depending on supply and demand.

And many times it depends a lot of what OPEC does. For example, most likely OPEC has kept the supply low as demand was less than normal because of the pandemic.

But now that many can see light at the end of the tunnel related to the pandemic demand for the different energy commodities as increase and OPEC has been unable to meet demand.,

If supplies are low that usually means an increase in prices and if supplies are high that usually means a decrease in prices.

And at the same time businesses will increase prices if they feel there is going to be an increase in demand which might be the case with OPEC as maybe they see as the pandemic winds down there is going to be more and more economic activity globally.

If regular gasoline prices continue to remain high it might be an incentive for some in Japan to not use their cars as much as instead use public transportation such as buses, trains, and the subway as a way to beat the high gas prices.

And at the same time high gas prices, over time, could begin to crowd out other kinds of spending whatever that might be meaning less consumer spending that is needed to help the economy get back to some kind of normal or new normal.

Domestic travel could be affected too if gasoline prices continue to increase or stay at a level where consumers have to cutback on other kinds of spending such domestic travel around Japan. 

And as we get closer to the winter months consumers will begin to think about heating costs and if kerosene prices keep increasing that is another cost they have to worry about and which again can also crowd out regular consumer spending as a families disposable income is now even less.

And then you add in the costs of energy used by businesses and their supply costs might eventually become too much and then they will try to pass on the rising costs to the next in the chain and eventually it will get to the average consumer and now consumers have to pay even more for products or maybe even services and now they have even less disposable income to spend in the economy.

There are two types of inflation that the Bank of Japan is always watching. The first kind is related to the increase in supply costs that can be passed on down the line that can hurt businesses and eventually effect consumers. 

The Bank of Japan is always worried about the effect of supply side inflation as if becomes too much it can reduce spending on many levels from businesses spending or investments to the increase in salaries for company employees and of course less disposable income related to families or consumers.

And then there is demand inflation that the Bank of Japan is always hoping increase. The Bank of Japan's goal of a 2.0 percent inflation rate is related with demand inflation and not supply inflation as demand inflation is a very good indicator that now there is a good amount of positive economic activity in the Japanese economy. 

But so far, since around 2014 the Bank of Japan has not been able to reach its goal of 2.0 percent yearly inflation for any number or reasons.

Have a nice day and be safe!