MANILA, Philippines - Every time President Macapagal-Arroyo makes a performance report on her presidency, she always puts on top of her list the economic reforms she has put in place, like the expanded value-added tax. These measures may not have won her public approval, she would say, but they have pushed the economy to grow at record pace and, more recently, allowed it to avoid the global recession. And then she would repeat her favorite mantra: she would rather be right than popular.

In her last year in office, however, Ms Arroyo is acting as if she would rather be popular than right. In the process, she has turned on its head the economic philosophy that used to guide her administration by interfering openly with the market.

Facing continuing criticism for the slow response to a series of natural calamities, especially Storm ?Ondoy? and Typhoon ?Pepeng,? the President has sought to put herself on the good side of the Filipino public by ordering oil companies to freeze the prices of their products in the whole of Luzon at the levels prevailing on Oct. 15. Executive Secretary Eduardo Ermita said the President issued Executive Order 839 to protect consumers from profiteering by the oil companies amid the devastation wrought by the typhoons and floods. He warned that the government would use all its powers to ensure compliance with the EO.

Fearing prosecution and even closure, the oil companies reluctantly complied with the EO but asked the administration to reconsider it. But they said that selling at the prescribed prices would result in big losses for them and create supply shortages, and they warned that the policy could jeopardize future investments in the industry.

Various business organizations, local and foreign, chimed in and echoed the warnings about reduction in supplies and disincentive to further investments. They said that the ?open-ended nature of this price control ... leaves the oil industry and all those who depend on oil products in a state of great uncertainty,? and urged the government to set a date for the lifting of the EO.

The government, however, appears determined to keep price controls in place, with the President rejecting an appeal by the oil companies for a dialogue. The administration and its allies said the state of emergency called for the implementation of extraordinary measures and urged the oil companies to take a loss for the time being.

That may be wishful thinking. The most that private companies might be persuaded to give up is their profits. Very few businesses would agree to take a loss, and the oil companies are not one of them. So less than two weeks after the EO was handed down, a few gasoline stations have shut down, while some others have reduced the number of pumps in operation.

Are they bluffing or girding for a showdown? The administration?s problem is that it cannot even call the bluff, if bluff it is. Not after the government gave up control of Petron, a strategic player in the local oil industry. Sure the government, if it is so insanely inclined, could run the oil companies out of business. But who will run the industry in their place? Who will buy the oil, bring it here and distribute it? In fact, who will sell to such a rogue government?

The irony of it is that the price cap benefits least the people who need help most. Albay Gov. Joey Salceda has pointed out that Filipinos earning P100,000 a year or less used only 18 percent of the total fuel, light and water consumed in 2006 and accounted for just 10 percent of all spending for transportation and communication. This means that the savings from lower fuel prices are enjoyed mainly by the more affluent members of society who own cars and use most of the water and electricity.

A better way to help the disadvantaged sectors, Salceda said, would be to issue diesel discounts, which would keep fares low; give fuel access cards to lower income groups; and distribute electricity vouchers to the poorest families.

Ms Arroyo has been known to heed the advice of Salceda, her former economics student. The teacher ought to listen to the student again.