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EDITORIAL: Fuel price
hike fuels disdain for Ma
President Ma Ying-jeou (馬英九) has not even started his second term, but his
popularity is already plummeting amid a storm of public complaints over the
relaxation of a ban on US beef imports, the demolition of houses in Taipei’s
Shilin District (士林) in an urban renewal project, the implementation of a
capital gains tax and the decision to remove the freeze on fuel price hikes.
The Ma administration has dealt with fuel price hikes before. When former
premier Liu Chao-shiuan’s (劉兆玄) Cabinet allowed fuel prices to rise in 2008, the
government paid a heavy price as its popularity rating took a drubbing, despite
the implementation of a range of measures designed to make oil companies absorb
some of the cost.
The government is now allowing a fuel price increase of about NT$3, even though
international oil prices are pulling back. The reason is that CPC Corp, Taiwan,
is unable to continue sustaining the financial burden of the government’s policy
that has kept prices low over the past five years, as well as Ma’s
implementation of a price freeze ahead of January’s presidential and legislative
elections aimed at keeping voters happy and avoiding a negative impact on his
election campaign.
Many consumers are likely to feel that such a sharp increase is unacceptable.
This is the problem with fuel price hikes: When the government implements a
price freeze or small, gradual price increases, no one is overtly pleased by
this, but if prices are suddenly allowed to reflect the market cost, everyone
starts complaining. However, like economists often say, there is no such thing
as a free lunch, and sooner or later we will all have to help repay the debt
accumulated as a result of several years of low or no price hikes.
Taiwan is heavily reliant on energy imports. The more closely energy prices
reflect market costs, the greater the incentive to curb waste, encourage energy
savings and develop alternative energy sources. CPC has a formula for adjusting
to oil price fluctuations, but that formula has been frequently interfered with
by both pan-blue and pan-green politicians. Any interference based on
non-economic factors means that every time prices are put back on track,
consumers suffer. The price hike this week might have devastated the public, but
that does not mean that prices are now reflecting real costs: There have been
reports that prices would have to rise by at least another 40 percent to do
that. This must happen sooner or later and until then, Taiwan must prepare for
another price shock.
Apart from the longstanding bad habit of interfering with fuel prices, the
latest price adjustment is only intended to make up for CPC’s losses. The
government has not proposed any complementary energy policies and the result is
that the public is ill prepared for, and unlikely to accept, fuel price hikes.
If the government also adjusted CPC’s financial and salary structure, and
adopted policy measures to encourage energy savings — for example, by
introducing higher prices for big consumers, thus amending the unreasonable
impression among the public and smaller consumers that they are subsidizing fuel
costs for big users — the public would probably feel a bit happier.
This big increase in fuel prices is just the beginning of more price increases.
Electricity prices and various transportation fees might be the first to follow,
and that would cause a general cost-of-living increase that would likely lead to
a public uproar.
If the government does not handle the situation with care, Ketagalan Boulevard
might become the site of a massive anti-Ma demonstration come the presidential
inauguration on May 20.
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