As a follow-up to yesterday's column here on oil manipulation, I saw today in the New York Times that Thomas Friedman (subscription required, which is only like $49.year -- roughly $4/month) has written about Brazil's response to the high price of oil. It turns out that sugar ethanol costs roughly half what ordinary gasoline costs. However, according to Friedman's article, ethanol makes roughly 30% less fuel economy than regular gasoline. So Brazilians simply do the math on the price of gasoline vs. the cost of ethanol.
The United States does not have enough cars that can run on ethanol to support widespread use of ethanol. Someone more technically savvy than me can explain it, but my understanding is that ethanol burns hotter, and is therefore harder on the engine's internal parts. If we were to produce ethanol here in the U.S., it would come from corn. However, corn-based ethanol is more expensive to produce according to a report at the Council on Hemispheric Affairs. I am not a farmer or scientist, but I think I read somewhere that corn is a pretty water-intensive crop to grow; and, unlike Brazil, the U.S. does not have that many rainforests. Lately, the midwest and plains have suffered drought conditions, which is not the best condition to expand corn crops.
Rather than try to come up with solutions that are dependent on climate forces, I suspect hybrid technology has more promise -- at least for the U.S. Besides, water is expected to become a more scarce and valuable resource in the future due to climate change. We do not need to waste it on alleviating our oil dependence.