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Japan's oil firms to adopt new pricing system

Japanese oil distributors Nippon Oil Corp. and Idemitsu Kosan Co. will base their wholesale prices of gasoline and other oil products on future and other market moves and revise them every week from October, industry sources said. The new pricing system will replace the current method of revising wholesale prices once a month for Nippon Oil and twice for Idemitsu on the basis of their latest crude oil procurement costs. With the new method, the two companies will weigh prices on the Tokyo Commodity Exchange (TOCOM) and spot prices presented by oil market information service company RIM Intelligence Co. In May, the nearest Middle East crude oil futures contract soared 17.2% on TOCOM, but average regular gasoline retail price rose only 4.5% as oil distributors’ wholesale prices did not reflect the crude price surge. As TOCOM has a few trading participants, oil wholesalers may be able to drive up prices easily, one gas station owner said. Revitalization of the futures market is thus seen necessary for the new pricing system to take root in the oil industry in Japan. (September 13, 2008)