Petroleum Aquisition Adjustment (PAA)

Posted By on August 27, 2005

A discussion about petroleum and how to encourage the US toward alternative energy revisited a group I belong to today, so I’ll include part of my post below.

First … B2, B5, B10, B15 and the quazi-standard B20 are all within the realm of possibilities when incentives are in place, prices are high and the national mindset is one of not being controlled yet again by OPEC. Those believing we’ll retire the use of petroleum in our lifetime and use other energy sources are probably not living in the real world, IMHO. The problem is that for national acceptance we’ll need to defend the alternatives in their infancy if we want to avoid the controls that foreign oil suppliers. I believe that as Blair suggested that OPEC would eventually lower prices in shutting down not only biofuels, but other young alternatives … and including our own countries ‘more costly’ US based petroleum related industries. (been there, done that if you are old enough to remember the 70s and then the 80s)

I’ll defend the soybean farmers only in that they are currently the power behind US biodiesel. Their support develops another market and higher demand for beans … even though most in this business realize other crops are better suited for biodiesel. They would prefer high demand for soybeans and therefore higher prices for soybeans which can be use for many, many products besides fuels. Such is the farming business.

There are several other options to traditional soil based farm crops. These could start an entirely new industry. One of the most promising is the desert farming of algae for biodiesel. We’re talking shallow salt ponds and harvesting hybrid algae strains grown specifically for fuels … yields are good and crop after crop can be mechanically harvested. The piping of Pacific Ocean water to the Sonoma desert makes this possible … yes it sounds like pie in the sky, but it is not as ridiculous as it seems considering what we do with pipelines today. Investment in this brand new industry would be significant, but would also create US jobs around a new highly profitable renewable fuel industry. Some calculations have determines that using only 9% of desert area in California could supply our entire nation with biodiesel??? (I’m sure there are skeptics. : ) Nevertheless … it does hold promise for those wondering how we could possibly grow enough oilcrops as the biofuel markets grow.

I also think that the biggest hurdle is that if we do begin to supplement our energy needs with something other than petroleum, we risk OPEC dropping the prices (again) just to get a lock on energy. Pumping oil out of the ground is still cheaper than producing that oil, but eventually the well runs dry? See Peak Oil for the variety of opinion on this. Not only would purposely driving the price of petroleum down deter alternatives, but it would hinder the development of hydrogen, fuel cells, hybrids, biofuels, oil sands, coal gasification and even the American oil industry which would undergo stress to remain profitable under lower per barrel prices. We would once again become reliant on cheaper foreign oil. (Have we learned a lesson this time? Doubtful.)

This brings us to what can and should be done to prevent this? Free market capitalist would let the markets run … and for the most part I do agree it is the proper way. BUT … do we quietly support cheap foreign oil with our federal taxes??? I think the answer would be ‘yes’ … some of our taxes are used to maintain shipping of oil, ports, security of wells and the countries which own them. It has been in our national interest to keep oil secure and flowing … and probably will continue to be. I have no problem with our federal government as needed to secure this and protect the environment as well. I do have a problem with that ‘cost’ not being included in the product when we purchase it. Therefore I like the PAA (Petroleum Acquisition Adjustment) …. which will equally reduce our income tax by the added adjustment to imported oil. This adjustment would be challenging legislation for our congress in accurately assessing the PAA and equally reducing income taxes …. in the end if done right it would be a zero net change in taxes for most all Americans. The only difference is that imported oil would have the PAA attached and the income taxes nationwide would be lower is some fair way. (easy to suggest < :)> but that’s what we elect our representative to do, right???)

For the record, I don’t see this getting much of a foothold at the moment … in fact it is only being discussed in a couple of closed circles to my knowledge. I see it important to prevent our country from falling back toward dependency on foreign oil. I’ll keep you posted if the handful of us promoting the PAA and let you know if it gets any traction. Feel free to offer constructive criticism or thoughts if you have them … as I’m hoping all political parties can see why this would be a good proposal.


  • mike

    I just saw a video on CNN about Honda’s hydrogen car. I was quite shocked that they said it cost 1 million $ to build just one car. They mentioned that critics say they are at least 20 years off and maybe longer depending on whether we can make some tech break-throughs.

Desultory - des-uhl-tawr-ee, -tohr-ee

  1. lacking in consistency, constancy, or visible order, disconnected; fitful: desultory conversation.
  2. digressing from or unconnected with the main subject; random: a desultory remark.