Conventional wisdom has lately been that ethanol is not all it's cracked up to be, taking more energy to produce than it creates when it's used. The most common opinion I've read/heard is that the current situation is mostly a new subsidy for the corn states of the midwest. It would appear, however, that like most conventional wisdom, there's a lot more to it than that:
Two prominent researchers are chiefly responsible for the energy-efficiency claim: Cornell University's David Pimentel and Tad Patzek of the University of California, Berkeley. In a co-written paper published last year in Natural Resources Research, Profs. Pimentel and Patzek wrote, "Ethanol production using corn grain required 29% more fossil energy than the ethanol fuel produced." By comparison, production of gasoline or diesel uses about 20% more fossil energy than the fuels produce. (For automobiles, ethanol is generally blended with gasoline in either 90-10 or 85-15 proportions, but the studies focused on the energy content of the ethanol itself.)
But the analysis stacks the deck against ethanol in a number of ways. Perhaps most important: The researchers attributed a wide array of energy costs to ethanol production, including the energy required to produce tractors used in cornfields and even all forms of energy consumed by workers for things such as food, transportation and police protection. Equivalent factors generally aren't included in comparable analyses of rival fuels like gasoline. Also, researchers didn't take into consideration the value of ethanol by-products, which can be used in cattle feed.
This guy, and the researchers he quotes, doesn't seem to be in the pocket of the corn lobby, but who knows. Regardless, it's the first cogent counterpoint I've seen to-date.