Japan’s earthquake and tsunami could lead to volatile prices for refiners and LNG importers in India

14-Mar-11

Indian refiners and LNG importers face volatile prices as the earthquake and the tsunami that ravaged parts of Japan, and on fears of unrest in the Middle East region that have rocked energy markets. The devastation of factories and disruption in air travel would temporarily impact fuel demand in Japan. Brent crude ebbed to US$112. However, in the long term, the shutdown of nuclear plants could boost demand for liquid fuel. As the disaster has hit nuclear plants in Japan, the country's gas-fired power stations are expected to burn more fuel, including liquefied natural gas, to offset the shortfall in electricity. Also, past experience has shown that the use of diesel-fired equipment to clear the rubble after earthquakes leads to boosted oil demand. LNG importers are closely tracking developments in international markets as the tsunami warnings have been issued in the Pacific Ocean. Taiwan, Philippines, Indonesia, Mexico, Chile and Russia are among the countries where warnings have been issued. Industry officials say that last time a major earthquake struck Japan, LNG prices had doubled in the spot market.