EDITORIAL - The temptation of populism

When an administration becomes embattled, populist policies hold a strong allure. President Arroyo, an economist, should know better than to succumb to the temptation of populism to boost her stock. The President must think twice before approving a proposal to subsidize diesel prices in Metro Manila to prevent an increase in transport fares. The proposal was made as public transport groups started enjoying discounted diesel prices in several participating gas stations.

The nation has tried fuel subsidies before. The first problem is where to get the funds to keep the subsidy going. Obviously the money isn’t going to come from the pockets of public officials, who benefit each time they announce a fuel price freeze or rollback even if the order did not come from them but from an energy regulatory body. No, at the end of the day the money is either taken from public coffers or passed on to consumers. So Juan de la Cruz, already hard-pressed to cough up enough taxes to support the lifestyles of the corrupt and moronic in government, ends up subsidizing diesel prices.

No doubt a fuel subsidy will benefit operators of public utility vehicles. What is in doubt is whether or not the suspension of transport fares will benefit the President and her beleaguered administration. The debacle in Iraq has obliterated earlier rosy projections about the global oil situation. Fuel prices are once again on the rise everywhere, after a brief period when it was thought that Iraqi oil would flood the world’s pipelines and bring down prices. How long can Malacañang hold diesel prices down artificially?

Regulating oil prices can work for an administration when the oil situation is stable and price rollbacks can be announced. Having given the impression that Malacañang has power over oil pricing, however, people will blame the government when prices go up. Politicizing oil pricing can fuel public unrest, especially when world crude supply is volatile – which is the situation prevailing after the Iraq war. Does President Arroyo want to go down this slippery slope?