A century ago, Henry Ford's first car ran on alcohol, while Rudolf Diesel fired his namesake engine with peanut oil. But both inventors soon discovered that "rock oil," when slightly refined, held far more bang per gallon than plant fuel, and was cheap to boot. Oil soon left plant fuels in the dust. Only in periods of scarcity—like the OPEC oil embargo of 1973—did the U.S. and other countries turn back to ethanol, mixing it into gasoline to stretch supplies.

It wasn't until 2000 that fuel alcohol staged a major comeback, largely as an additive in less polluting gasoline blends. For years, ethanol producers had enjoyed heavy subsidies and protective tariffs on imports, while Archer Daniels Midland, the largest U.S. ethanol producer, advocated mixing ethanol into motor fuel. But ethanol ran into stiff competition with the oil industry's own additive, methyl tertiary-butyl ether (MTBE).

Then MTBE, a suspected cancer agent, began turning up in aquifers, prompting many states to ban the chemical and suddenly creating a two-billion-gallon market for ethanol. Recently, with the Middle East in turmoil and oil security once again a hot issue, Congress gave the ethanol industry another boost, extending the tax credits and tariffs while requiring that 7.5 billion gallons (28 billion liters) of the nation's fuel come from ethanol or biodiesel by 2012. (That figure could rise to 60 billion gallons, 227 billion liters, by 2030 if some senators have their way.) The biofuels boom was on.

Ethanol enthusiasts point out that the oil industry has also reaped huge subsidies for decades, including billions of dollars a year in tax breaks, as well as tens of billions of dollars annually to defend oil fields in the Middle East—even before the war in Iraq. Not to mention the untallied costs to health and the environment of pollution from cars, trucks, and the oil industry itself. And while oil subsidies flow into the hands of the wealthiest companies in the world, ethanol subsidies are fueling a renaissance in small heartland towns with names like Wahoo, Nebraska.

By this summer, with Nebraska's 16 ethanol plants gearing up to consume a third of the state's crop, corn prices had doubled, briefly topping four dollars a bushel, and growers were looking forward to the best profits in memory. "This is the first year I've planted all corn and no beans," says Roger Harders as he finishes lunch at the Wigwam Café in Wahoo. He also has cattle that this year will eat a lot more grass than four-dollar corn. "You're almost tempted to get out of the cattle business and sell your corn outright."

Gary Rasmussen, co-owner of the local Case-IH implement dealership, sold ten new corn harvesters at upwards of $200,000 each from December through February, twice as many as usual, and his tractor sales are up as well.

A computer screen showing the latest corn prices is on prominent display on the sales floor. "Anytime you see a surge in commodity markets, you see a brighter future," says Rasmussen. "Ethanol is going to be a real driver." Despite the boom, it's hard to fill up with ethanol in the U.S. It's still mainly a gasoline additive. Only about 1,200 stations scattered mostly across the corn belt sell ethanol, in the form of E85 (85 percent ethanol, 15 percent gas), which can be burned only in specially designed engines. Ethanol delivers 30 percent fewer miles a gallon than gasoline, but at around $2.80 a gallon in the heartland, it is competitive with $3.20-a-gallon gas. Since the U.S. has no major pipelines for ethanol, transportation by truck, rail, or barge drives up the price elsewhere. But more ethanol plants are popping up all the time.