When we first picked up on the ethanol story we had no idea that the story would have such legs. In retrospect it is not all that surprising. The ethanol story crosses across so many different lines. Those include: commodity prices (corn), gasoline prices, technology (cellulosic ethanol), tax policy (ethanol subsidies), politics (Midwest), private equity investment, initial public offerings, etc. Given some recent news we should expect the flow of news to continue for quite some time.

John J. Fialka and Scott Kliman in the Wall Street Journal survey the increasingly crowded field of companies seeking out new and more efficient ways of generating ethanol. Cellulosic ethanol, as opposed to current corn based methods, seem to be the wave of the future.

In the U.S., ethanol for fuel is typically made from corn. But growing corn gobbles up a lot of power in the form of everything from fertilizer to pesticides. The economics of cellulosic ethanol, made essentially from waste, could be different. With the booming economies of China and India helping increase the world’s appetite for petroleum faster than new sources of fossil fuel can be found, economists figure there will be a need for tens of billions of gallons of alternative fuels within just a few decades.

“Suddenly, there is a race out there to develop a new source of energy,” says Thomas Connelly, DuPont’s chief innovation officer.

The bulk of the article chronicles the race to demonstrate more efficient ways of generating ethanol. The ethanol story is not a clean one. The existence of numerous tax subsidies makes the industry dependent on the whims of politicians. However the biggest worry for ethanol producers is a simple one: the price of gasoline. As long as gasoline hovers above $3 a gallon producers and drivers will continue to seek out alternatives to good old fashioned unleaded.

Jeffrey McCracken also in the Wall Street Journal documents a retreat by Ford Motor (F) away from hybrids towards flexible fuel vehicles. Given the relatively low cost to create a flexible fuel vehicle versus the hybrid powertrain this should not really come as a shock.

Nor is it a shock to Joe Weisenthal at DealBreaker.com. Joe has a more cynical take on Ford’s moves. Citing the numerous benefits government showers on ethanol it makes sense that the troubled automaker would fall back on the low-cost route of E85 flexible fuel vehicles to burnish their environmental bona fides (and patriotic image).

AutoblogGreen may have found the biggest fan of flexible fuel vehicles. A Los Angeles-based musician has created an E85 fan site including a download of his song, “Green Girl.” With a “grassroots” campaign like this we are confident that the ethanol story still has some legs.

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