Is it now Japan’s turn?

 As a result of the worldwide energy shortage, power prices have reached new highs for the first time in nine months


Gains in global oil, liquefied natural gas (LNG), and coal prices are starting to flow through to Japan’s $150 billion power market, causing electricity prices to soar to nine-month highs this week.

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Higher oil, gas, and coal costs are bringing back inflation in Japan, which imports all but a small portion of its energy requirements, with wholesale prices at 13-year highs.

Elevated power costs are also bringing up memories of last winter, when prices hit all-time highs and Japan’s system came close to collapsing in the country’s greatest energy crisis since the Fukushima tragedy.

On Tuesday, spot rates for peak-hour energy supply touched 50 yen ($0.44) per kilowatt hour (kWh), narrowly missing the previous day’s record of 50.01 JPY/kWh, which was the most since January.

“We’re seeing thermal generation provided to the market at progressively higher rates in order to either save fuel for the winter or be compensated on an opportunity-cost basis,” one trader said.

Rising LNG and coal costs are pushing price increases, as they were last winter, and with lower temperatures just weeks away, Japan’s main utilities have been taking efforts to avoid a repeat disaster.

LNG stocks have been replenished and currently stand at over 2.4 million tonnes, almost 600,000 tonnes greater than the four-year norm for this time of year, according to Japan’s industry ministry.

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Based on LNG imports of 74.4 million tonnes last year, this equates to approximately a 12-day supply.

“After last year’s outages, Japan learned its lesson and began accumulating LNG early this winter,” said one LNG dealer.

(1 dollar Equals 113.2100 yen)