Earthquakes usually exact a limited toll on the global economy. The earthquake and tsunami that struck Japan in March 2011 was different, however, as energy markets across the globe felt the impact. Japan is a large player in world energy markets, including petroleum. The disaster occurred when Japan's liquid consumption was starting its seasonal decline. While most of the apparent liquids consumption decline that eventually occurred was seasonal, the earthquake and the tsunami exacted their toll as well: Japan's consumption level in May 2011 dropped to the lowest monthly level since recordkeeping began in 1984. However, as Japan's recovery has progressed, the direction of the disaster's impact on the nation's petroleum use has reversed. With only 10 of 54 nuclear reactors currently operating, liquid fuels and natural gas used for power generation increased to make up for the lost nuclear generation. According to the International Energy Agency's (IEA) Monthly Oil Data Service, Japan's average daily liquid fuels consumption in July and August was higher than last year.
Despite having few domestic energy resources, Japan plays a vital role in many global energy markets. It is the world's fourth largest energy consumer, and prior to the earthquake, the third largest producer of nuclear power. The country is one of the top five natural gas consuming nations and the world's largest importer of liquefied natural gas (LNG) and coal. Japan is also the world's third largest liquid fuels consuming economy, surpassed only by the United States and China, which requires it to be the world's third largest importer of crude oil.
Japan's nuclear power generation infrastructure sustained significant damage, mostly as a result of the tsunami. More significantly, undamaged nuclear reactors that were taken offline following the Fukushima incident accounted for the majority of the nuclear capacity that was shut down, leading to an increased demand for fossil fuels to meet base-load power generation needs. According to the latest information provided by the Japan Atomic Energy Agency, the shutdown capacity totals 40,276 megawatts (MW), while the 10 units currently operating account for about 8,684 MW of nuclear capacity. Other fuels were used to replace the lost nuclear generating capacity. This was mostly in the form of natural gas but also liquid fuels; some estimates reported increases as high as 200 thousand barrels per day (bbl/d). The Federation of Electric Power Companies of Japan reported that LNG consumption by power producers rose nearly 31 percent by June year-over-year, and by 23 percent by July. In fact, Japan's July LNG imports rose to a five-year high of 7.1 million tons, according to Deutsche Bank.