Something stinks at Imperium Renewables, and it's not the Southeast Asian palm oil. In the last few weeks the company has shed its CEO, pulled back from a much anticipated initial public offering, and (this week) announced cuts to its corporate work force. Sam from HR and Diane from marketing are packing their cubicles, leaving the engineers to run the shop. Cutting back at corporate is like a late '90s internet company selling the Ferrari and the ping pong table - bouncing the unnecessary costs to keep the ship afloat. For a company once regarded as the boy genius of biofuel it is clear now Imperium is muddling its way through what can charitably be called Act II of Titus Andronicus. So the question remains, are things at Imperium as bad as they seem, or is another example of the growing pains many analysts expect green tech companies will experience as the market matures? For the answer, I offer a short trip down memory lane. In August 2007 Imperium opened its 100 million gallon capacity, $78 million biodiesel plant in Grays Harbor near Seattle. Operating at full production, Imperium anticipated controlling 40 percent of the U.S. biodiesel market by 2009. Current domestic production was pegged at 75 million gallons, with projections of 1 billion by the end of 2009. Imperium's initial calculation was based both on full production at Grays Harbor and an expected 300 million gallon capacity expansion at proposed plants in Hawaii, Pennsylvania, and Argentina that were expected to be completed by the end of 2008. To finance the expansion, Imperium filed an S-1 with the SEC in May 2007 announcing its intention to raise a $345 million IPO. $220 million would go to the new plants. The IPO, in addition to its previous $214 million in equity and debt financing, would have left the company enough capital to build the plants and maintain a steady flow of palm oil feedstock from Southeast Asia. Whoa! $100 oil! I bet Martin Tobias, Imperium's imperius ex-CEO, never saw that coming. While the treehuggers like to tell us that high oil prices drive down the cost of biofuels and we should be grateful when the Nigerians blow up another refinery, this is in fact not the case. Here's why. Increases in the global oil price drives demand for biofuels. However, since your average biofuel refiner isn't vertically integrated it can't pull from its own reserves. 85 percent of global crude palm oil is grown in Malaysia and Indonesia, which in addition to having uninspiring industrial agricultural production, are pretty far away from Grays Harbor. Those tankers run on $100 oil. Crop ravaging monsoons and floods are another negative. Even before the boats have the left the harbor in Kuala Lumpur, Imperium should build these variables into their cost outlays. Another problem is that a lot of people use palm oil, including all of India and China. In the battle of India and China vs. Imperium Renewables, my vote goes to Mao and Gandhi. Enough talk, though. Let's look at the numbers. March 2008 contracts for crude palm oil were trading on the Malaysian derivatives exchange at 3,159 ringgit ($USD 977.06) per metric ton on January 9. January 2008 contracts were trading at 2,874 ringgit ($USD 823.66) per metric ton on October 19, 2007. Now, the Grays Harbor plant has a capacity of about 90 million metric tons, though it takes a lot more than 90 million metric tons of feedstock to refine and produce that amount of finished biodiesel. With the cost of futures contract bouncing $153.40 in four months its fair to say Imperium faced a little bit of margin squeezing. Enough to delay its IPO and reduce its corporate work force. Forget about the 300 million gallon capacity expansion. Forget about that Christmas bonus, Martin, and don't steal any office supplies on the way out. Is this enough to send Paul Allen wandering through the streets of Seattle shouting "Help me Vinod Khosla! You're my only hope!"? Probably not. Though it does help to explain why Imperium has sought a joint venture with Solazyme - a producer of algae feedstock for biofuel - and taken steps to secure a supply of Washington State canola oil. The dark times at Imperium are most likely the result of the company getting ahead of itself without taking into account fluctuations in the global crude palm oil markets or the tanking dollar. Imperium might consider opening its next plant in Southeast Asia to take advantages of these factors. Taking the long view, it would be good for some biofuel companies to begin looking into product distribution. That $0.99 per gallon federal tax subsidy isn't going to do much unless your Chevy Suburban is burning Imperium Super Premium. When's the last time you bought biodiesel at your local gas station? In the mean time, someone should remind Malaysia and Indonesia that tearing down their rainforests defeats the purpose of producing biodiesel feedstock.