As the Middle East conflict keeps pushing oil prices up (recently hitting $119 per barrel), proposals for price controls are brewing in many countries including the Philippines.

In a new bill, Senator Bam Aquino wants to classify gasoline and diesel as basic necessities under the Price Act so the government can freeze their prices during emergencies. Meanwhile, President Ferdinand Marcos Jr. announced that he will impose a P50 per kilo cap on imported milled rice after the Department of Agriculture flagged “unreasonable” price increases by retailers supposedly exploiting the oil shock.

Both measures are well-meaning: they aim to protect Filipino consumers from the pain of rising prices. But both, I’m afraid, are laden with unintended consequences and could predictably make life worse for Filipinos.

Fuel price caps

Let’s start with Senator Aquino’s bill. Currently, the Price Act (as amended) covers only LPG and kerosene among petroleum products. Aquino wants to add gasoline, diesel, and other petroleum products to the list of basic necessities that can be subjected to a price ceiling during a declared national emergency. He also wants to extend the price freeze period from 15 to 30 days.

It’s reasonable to argue that gasoline and diesel are essential goods. They power transport, logistics, and a huge chunk of the economy. But calling them “basic necessities” in the legal sense, and subjecting them to price ceilings, is a different matter entirely. It opens the door to a policy instrument that has a dismal track record worldwide.

You see, when the government sets a price ceiling below the market price, one of the first things that happens is that supply dries up. Sellers who can’t cover their costs at the controlled price will reduce supply or exit the market altogether. In the Philippines, that might mean that orders of diesel and gasoline from abroad may be reduced to a trickle if selling here will entail huge losses for oil companies.

At the same time, an artificially lower price drives up demand. The combination of lower quantity supplied and higher quantity demanded spells shortages, hoarding, and long queues. Do we really want to see our remaining gas and diesel supplies — limited as they are — to deplete faster than they need to?

We don’t have to look far for examples. Anyone old enough to remember the era of oil regulation in the Philippines (from the time of President Ferdinand E. Marcos until before the Oil Deregulation Law of 1998) will recall the rationing and supply disruptions that came with it. The old Oil Price Stabilization Fund, which effectively subsidized the price of fuel, also led to tremendous losses for the Philippine government.

Interestingly, Thailand is grappling with its problematic Oil Fuel Fund, which similarly led to huge deficits in past decades. A recent article said, “The lesson from that period was stark. Freezing prices in the short term may ease hardship, but if global oil prices stay high for an extended period, the [Oil Fuel Fund] loses its ability to cope. In the end, the public still faces a sharp and painful adjustment, often more sudden than if prices had been allowed to move earlier.”

Sure, Aquino’s proposal is meant for emergencies and would last only 15 to 30 days. But emergencies don’t always end on schedule. No one knows when the US and Israel’s war against Iran will end. In the meantime, the political temptation to extend price controls will be strong.

Aquino’s proposal to suspend or remove the 12% VAT on fuel might make more sense. But if it comes through, such a proposal also means the government would lose a significant chunk of revenues at a time when we are already grappling with the costs of the oil crisis and there’s a huge demand for financial assistance to the poor.

Rice price caps: déjà vu

As for rice price caps, President Marcos announced he would issue an executive order capping the price of imported milled rice at P50 per kilo, after the Department of Agriculture reported that some retailers were selling imported rice at P55 to P58 per kilo. Agriculture Secretary Francisco Tiu Laurel Jr. pointed to “unreasonable” price hikes, suggesting retailers were exploiting the oil crisis.

This is déjà vu. Price controls on rice have been tried before in this country, and the results have ranged from disappointing to disastrous. A rice price ceiling invites the same problems as an oil price ceiling: supply disruptions, evasion by sellers, and the emergence of black markets. Traders who cannot sell profitably at P50 per kilo will find ways around the cap, or simply stop selling.

Apparently the Marcos government didn’t learn the lessons of 2023, when it similarly imposed rice price ceilings. What happened then? Retail sellers of rice ended up with huge losses and sold only the poorest quality rice (smelly when cooked and akin to “dog food”). In the end, President Marcos lifted the price cap less than a month after imposing it.

Fast-forward to 2026, if the issue is that some retailers are jacking up prices opportunistically, then the correct response is stricter enforcement, not price controls. The government already has the power to go after profiteering and hoarding under existing laws. What it lacks is the capacity and willpower to enforce those laws consistently.

We should also be honest about what the government is trying to manage here. Rice prices have been volatile for years, and the causes are structural: the Philippines is a major rice importer, vulnerable to global supply shocks, and domestic production remains insufficient. No price cap can fix these underlying problems. It only masks them temporarily while creating new distortions in the market.

Marcos’ P20-per-kilo rice program, distributed at hundreds of centers nationwide, would the better approach. Targeted subsidies that bring cheap rice directly to low-income consumers are far more effective than blanket price controls that benefit everyone equally, including those who can afford P58 per kilo without breaking a sweat.

What should be done instead

The common thread here is that price controls are a Band-Aid solution to problems that require deeper structural reforms.

For oil, the government should focus on expanding targeted cash transfers to the poorest households and transport workers who are most affected by high fuel prices, rather than distorting the fuel market. For rice, strengthening buffer stocks, investing in domestic production, and going after profiteers are more sustainable than slapping a ceiling price on a commodity whose underlying supply constraints haven’t changed.

The impulse is understandable. When prices are rising and people are hurting, politicians want to be seen doing something. Price controls are visible, immediate, easy to explain, and therefore popular.

But the economics is clear: they almost always create more problems than they solve. The question for our policymakers is whether they’re willing to do the harder work of targeted relief and structural reform, or keep falling for the price cap trap. – Rappler.com

Dr. JC Punongbayan is an assistant professor at the UP School of Economics and the author of False Nostalgia: The Marcos “Golden Age” Myths and How to Debunk Them. In 2024, he received The Outstanding Young Men (TOYM) Award for economics. Follow him on Instagram (@jcpunongbayan).

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