OPINION | Of quick fixes, pass through and silver linings [Introspective By Raul V. Fabella] READ:
In the wake of the Yom Kippur War in 1972, the Arab world through OPEC decided to constrict oil supply, thereby forcing the world oil price to spike from an average of $3/barrel of oil in 1972 to $12/barrel in 1974 and to about $37/barrel after the Iran oil embargo in 1981. Gas station queues, global and local economic contractions, record unemployment and inflation were the result.
The imported fossil fuel price volatility we cannot control. We control how we respond which will determine how fast we recover. During the 1970s, many countries resorted to quick fixes, such as overt and/or covert , tax cuts, and price controls. A few countries adopted the “pass through and reset” policy. The latter countries, among them South Korea in 1973 and Taiwan in 1979, saw higher initial inflation but more quickly receded, allowing a quicker return of investment and growth .
the gasoline pump price today at P77/liter will immediately drop to P67/liter and diesel will fall to P59/liter from P65/liter. But who really benefits? Affluent