US Oil Companies in Japan Reassess Budgets Amid Deteriorating Dollar

The rapidly declining US dollar against the yen is causing US oil companies in Japan to reevaluate their budgets, with several major companies adjusting their financial forecasts to account for the weakening currency. A major oil company executive noted that the dollar was valued at 115 yen in August 1993, but has since declined to a postwar low of 96.55 yen in mid-1994. The decreasing dollar value means that parent companies must allocate more financial resources to their Japanese units to cover fixed expenses, further pressuring profit margins.

Key Takeaways:

• The US dollar has declined from 115 yen in August 1993 to 96.55 yen in mid-1994, its lowest value in the post-war period.
• The strong yen is forcing US oil companies in Japan to reassess their budgets and allocate more financial resources to cover fixed expenses.
• US oil firm balance sheets are being battered in Asia due to the strong yen and high crude oil prices eroding profit margins in Singapore.
• An oil executive at a major US-owned refinery in Tokyo noted that the company's new forecast is for the dollar to average around 95 yen this year.
• The value of crude oil priced in yen has declined for Japanese refiners, but supply costs for US refiners have increased.
• The Organization of Petroleum Exporting Countries (OPEC) crude oil basket price has risen to $17.92/bbl since April, but the dollar has fallen from 105 yen.
• Japanese refiners face a 13% rise in the cost of crude oil in yen, while US refiners face a 17% rise in the dollar cost.
• The value of the Singapore dollar against the US dollar has risen 5.6% this year, to $1.51 from $1.60, adding pressure on US refiners.

Statistics:

• The US dollar value against the yen has declined from 115 yen in August 1993 to 96.55 yen in mid-1994, a decrease of 16.3%.
• The dollar has fallen from more than 110 yen in January 1994 to a postwar low of 96.55 yen in mid-1994.
• The Organization of Petroleum Exporting Countries (OPEC) crude oil basket price has risen to $17.92/bbl since April, an increase of 23.3%.
• Japanese refiners face a 13% rise in the cost of crude oil in yen, while US refiners face a 17% rise in the dollar cost.
• The value of the Singapore dollar against the US dollar has risen 5.6% this year, to $1.51 from $1.60.

Sources:

• An oil executive at a major US-owned refinery in Tokyo
• "U.S. oil company balance sheets are being battered in Asia as the strong yen forces them to commit more capital to Japan, and high crude oil prices erode profit margins in Singapore, oil industry sources said." (Source: Oil industry sources)
• The Organization of Petroleum Exporting Countries (OPEC)
• Reuters (Source: Reuters)