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Excerpt:
The following is from the Aug. 10, 2008, edition of The Lubbock Avalanche-Journal. Bruce Bullock, director of SMU's Maguire Energy Institute, provided expertise for this story.


West Texas ethanol plants may fail if materials
for the product change as planned

By Elliott Blackburn
AVALANCHE-JOURNAL
.

Officials hailed the plants as part of the new green energy boom, recruiting new jobs, millions of construction dollars and a new tax base to rural areas.

Three ethanol breweries operated by two companies opened in the Panhandle within the past year, capable of producing 240 million gallons annually. A long-delayed fourth could open by the end of 2008, bringing the total to 355 million gallons.

"It's a business model that I think is destined, ultimately, to failure," said Bruce Bullock, director of Southern Methodist University's Maguire Energy Institute.

Debate continues over just how much influence ethanol holds over the price of food for humans and livestock, but ethanol producers have found themselves a favorite target as many face bigger grocery bills and food shortages. . .

Ethanol suffers from more basic business problems, as well, that don't trip up its conventional cousins, Bullock said.

Oil refiners can produce numerous products from crude - gasoline, diesel, asphalt, jet fuel. Ethanol producers are tied to one, leaving them vulnerable to the fortune of a single product heavily influenced by federal policy.

The alternative fuel can't do much to control its raw materials costs, either.

Gasoline and diesel retailers cope with the rise and fall of crude prices by managing how quickly the retail prices follow their raw material's ups and downs.

But ethanol doesn't have much of a retail market, Bullock said. Producers can't recoup money lost from spiking corn or from sudden drops in crude oil that affect the price they can receive.

Read the full story.

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