[Bloomberg Column] Japan Could Redraw the Global Oil Map

Turning Away from 90% Middle East Oil Dependence
U.S. Becomes Top Supplier with 37% Share
Pursuing Diversification of Sources and Transportation Routes

Among the world's major energy-consuming nations, none is as vulnerable in terms of energy security as Japan. Japan is highly dependent on foreign sources, importing 99.9% of its oil, 99.7% of its coal, and 97.8% of its natural gas for domestic consumption. As a result, Japan has always reviewed its supply chains and responded swiftly whenever there has been a major energy crisis. This is also why Japan's actions serve as a global leading indicator for the world energy market.

So what signal is Japan sending during the current energy crisis triggered by the military confrontation between the United States and Iran? Simply put, Japan indicates that it needs to break away from excessive dependence on the Middle East.

Japan became acutely aware of its energy security vulnerability during the two oil shocks of the 1970s. Yet, even after that, it continued to rely on the Middle East as its main crude oil supplier, sourcing over 90% of its oil imports from the region. Now, however, even within Japan, voices are emerging suggesting this strategy was a mistake. Nobuo Tanaka, former Executive Director of the International Energy Agency (IEA), once described Japan's Middle East dependency policy as a "Japanese blunder."

Currently, the Japanese government is striving to correct past policy failures of relying solely on the Middle East by diversifying its procurement sources and transportation routes. The Cabinet has not yet proposed concrete numerical targets or figures, but its direction is clear. The country aims to break away from the structural impediment to economic growth caused by recurring instability and restrictions in energy supplies. Related plans are currently under discussion, and measures that include specific crude oil import targets and financial support are likely to be announced within the year.

In fact, Japan is already changing its sources of imports without waiting for the Iran war to end. According to the most recent data available, from July, the top supplier to Japan shifted from the Middle East to the United States. The statistics show that the U.S. accounted for 37% of Japan's total oil imports. Washington has now become Tokyo's largest crude oil provider. In addition, countries in the Central and South American region, including Mexico, now account for about 3% of imports.

Notably, the rise of the United States as Japan's largest oil supplier vividly reflects both the "shale revolution" (the surge in U.S. energy production driven by technological innovation) and the changes in the global oil market caused by the Iran war. As the existing Middle East-centric oil supply structure is shaken, the U.S. is emerging as a new alternative source of supply.

Of course, it will not be easy to establish the temporarily shifted import proportions caused by Middle East instability as a long-term supply structure. However, looking back at Japan’s previous experiences, if the nation perceives a threat to national security, it is capable of radically restructuring even its energy consumption patterns. In the late 1970s, Japan’s daily oil consumption exceeded 5.5 million barrels, and more than 60% of total electricity was generated by burning crude and heavy oils. Later, Japan transitioned its energy sources to coal, nuclear, and liquefied natural gas (LNG), effectively removing oil from the power generation sector. As a result, in 2025, Japan’s daily oil consumption fell below 3 million barrels—its lowest level in 55 years.

The next area of focus for Japan is the transportation sector. While Japan has dramatically reduced its dependence on oil for power generation in the past, its new target must be even more ambitious: reducing oil demand itself by cutting fuel use for automobiles. Through the spread of hybrid vehicles, Japan succeeded in halving its gasoline consumption over the past 20 years. Toyota developed the Prius, the world’s first mass-produced hybrid car. However, Japan still lags behind in the adoption of pure electric vehicles (EVs). Although Japanese automakers led the way in developing hybrid technology, they have not pursued EV development as actively as their Chinese counterparts.

Indeed, in Japan—the world’s fourth-largest automobile market—pure electric vehicles account for only around 2% of new car sales. This is far below Europe's average of 28%, and it is even lower than the figures in the United States and Canada. The IEA attributes Japan’s slow EV adoption to factors such as a high proportion of apartment dwellers and insufficient private parking and charging infrastructure. Therefore, the Japanese government must not only diversify its crude oil suppliers, but also actively promote the spread of electric vehicles.

Such changes in Japan could ultimately have a significant impact on the global oil market. If Japan lowers its dependence on Middle Eastern oil, other Asian nations may follow suit. South Korea has already announced the goal of reducing the share of oil imports from any single region to below 50%. Currently, the Middle East accounts for over 75% of South Korea’s oil imports. Likewise, India has been seeking to diversify its oil suppliers even before the Iran war.

The global oil market is a zero-sum game, where one nation securing a new supplier inevitably affects existing buyers. Japan, too, as it reduces dependence on Middle Eastern oil, will need to expand its procurement to regions such as West Africa and the Americas. As these regions have traditionally been markets where European refiners sourced oil, competition between Japan and other existing buyers will become inevitable.

Conversely, Middle Eastern producers will be forced to seek new buyers. But the question remains: which country would be willing to increase its reliance on Middle Eastern oil under the current circumstances? No obvious candidates come to mind.

Of course, this is not a problem Japan needs to solve. What is clear, however, is that Japan’s choices may well redraw the global oil map.

Javier Blas, Bloomberg Opinion Columnist

This article is a translation by The Asia Business Daily of Bloomberg’s column ‘Japan Could Redraw the Global Oil Map’.

*This column has been published as part of a strategic partnership between The Asia Business Daily and Bloomberg.

This content was produced with the assistance of AI translation services.