Japan's largest refiner Nippon Oil Corp said on Tuesday it was considering a merger with rival Kyushu Oil Co.The announcement comes with crude oil prices at a record high and demand for consumer fuels slowly shrinking in the world's third-largest oil consumer as the population ages and younger drivers seek out more fuel-efficient cars.
Crude oil prices have risen over 16% this year to highs of over a $110 a barrel, increasing import costs to Japanese refiners.
On Monday, Nippon Oil's chairman said record high oil prices may force the refiner to raise wholesale gas prices from April, possibly pushing Japan's pump prices past the record high set in mid-December.
Weakening consumer demand for gasoline, which accounts for about a quarter of Japan's oil usage, as well as increased competition between gasoline stations, are also eating into Japanese refiner profits.
In 2007, sales of gasoline fell for a second year in a row, after over 30 years of growth following the energy crisis of the early 1970s, the Ministry of Economy, Trade and Industry (METI) said in late January.
The Nippon Oil group, including affiliates such as Nihonkai Oil, has a refining capacity of 1.217 million barrels per day (bpd), about a quarter of Japan's total.
Kyushu Oil's refining capacity at its sole Oita plant in southwestern Japan is 160,000 bpd.
The Nikkei business daily had reported earlier on Tuesday that Nippon Oil plans to acquire Kyushu Oil via an equity swap. (Reuters)