By Tsvetana Paraskova of OilPrice.com

Japan’s nationwide day-ahead electricity price soared by 20% in one week to settle on Monday at the highest level since January 2023, as gas supply disruptions from the Middle East and an intense heatwave pushed up prices and consumption.  

The day-ahead power price in Japan has jumped to $0.16 (25.18 Japanese yen) per kilowatt-hour (kWh) on Monday, per data from the Japan Electric Power Exchange cited by Bloomberg.

The heatwave in Japan is set to intensify later this week, with temperatures peaking on Wednesday, according to weather forecasts.

While the heatwave is boosting consumption, the oil and gas supply disruption in the Middle East has raised Japan’s fuel costs as LNG prices have doubled from before the Iran war began and Qatar’s LNG supply was trapped behind the Strait of Hormuz.

Japan, one of the world’s biggest LNG importers, earlier this summer reduced gas-fired generation in favor of coal as the price of liquefied natural gas remained elevated.

Japan has been burning more coal and less gas for power generation since the war in the Middle East started, and it is not the only one. All Asian countries have made the switch from gas to coal on affordability and availability grounds.

Moreover, surging oil prices have led to a significant increase in Japan’s import bill for oil and LNG.

The price of spot LNG deliveries into northeast Asia soared to a five-month high at the end of last week amid the renewed hostilities in the Middle East and the return of the blockage of the Strait of Hormuz, which cut off Qatar’s LNG supply again.

The average spot LNG price for October delivery into north-east Asia was estimated at $22.50 per million British thermal units (MMBtu) at the end of last week, the highest level since the early days of the Middle East conflict.

As a result, fuel costs for power supply in resource-poor Japan jumped to the highest level in over three and a half years.