Oil on the boil: Japan mulls phasing out gasoline subsidies from December - What to know

The Japanese government is reportedly considering scaling back gasoline subsidies from as early as December. This comes amid growing concerns that funding for the costly measure could eventually run short, according to a Reuters report citing two ruling party officials.

Implemented in March as an emergency step, the policy was designed to protect businesses and households from skyrocketing oil prices triggered by the US-Israeli war with Iran.

With crude oil prices still high, the program requires several billion dollars each month to cap the national average for regular gasoline at roughly 170 yen ($1.09) per litre, Reuters said. This is quickly draining the 3.1 trillion yen supplementary budget that was approved in June.

The officials told the news agency that a plan currently under review by the government and the ruling coalition would slowly decrease the weekly payouts to fuel distributors.

This phased reduction would push the average retail price of gasoline to roughly 175 yen per litre in December and 180 yen by January, Reuters reported.

The Agency for Natural Resources and Energy did not comment.

The debate also comes ahead of Prime Minister Sanae Takaichi's planned reduction in the consumption tax on food and beverages from April next year.

“Once the consumption tax cut begins, households will feel less financial pressure. We would like to reduce gasoline subsidies as much as possible by then,” a source told Reuters.

Japan's government has begun considering other measures to shield households from rising energy costs, including the possible re-introduction of gas and electricity subsidies that expired in September.

The global benchmark traded near $113 a barrel, marking an approximate 3 per cent increase for the week, while West Texas Intermediate (WTI) held above $99.

The recent surge in prices follows claims by Iran-backed Houthi militants that they carried out attacks on the Saudi Red Sea port of Yanbu, alongside deadly strikes on a kingdom oil field and airport.

This sudden escalation threatens to destabilise the crucial Strait of Hormuz shipping route, where crude exports had recently returned to near pre-war levels.

Global oil markets have faced extreme volatility this year, with Brent surging over 85 per cent, largely due to the ongoing US-Iran war, now approaching its ninth month. The price rally has been even steeper for refined petroleum products, most notably diesel.

The geopolitical landscape remains highly tense. Speaking to reporters at the White House on Thursday, US President Donald Trump stated that the US has “knocked” out Iran and threatened to go “a little bit further,” though he did not elaborate on what those actions would entail.

The New York Times reported this week that the US and Israel have formulated plans for renewed military strikes against the Islamic Republic following the American midterm elections early next month.

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