A great post at Planet Gore today on ethanol use in modern engines. They explain that the current gasoline price spike is not due to oil commodity prices*, but to the Spring to Summer fuel formulation switch. But there is no longer a basis for the switch to Summer blends due to modern engine technologies. It is just another federally imposed screw-job.
The post references this excellent piece by Patrick Bedard in Car & Driver which debunks several ethanol myths.
* There hasn't been a corresponding spike in diesel prices. I spotted diesel priced 80 cents less per gallon than unleaded in Indiana.