Maybe because dems want this issue, the coverage has been poor, but I have spent some time looking into it. It appears that our actual demand for oil has declined in the US by 5% since last September. Ethanol doubled last year and is set to double again this year, as are ethanol stations. Some Republican governors (Pataki, Bush, Indiana) appear to be working on this in addition to the energy bill finally passed by the Congress.
GM and Ford are both retooling to produce a very different fleet of American cars including hybrids, flex fuel, and hydrogen for the military which has a goal of reducing gas by 75%.
Every change brings new problems with it. At this point, I think the discussion could properly move from hypothetical to actual. There are 5 m flex cars on the road and more every day. There may be 1/2m hybrids. There is a protype hydrogen truck at Ft. Belvoir. As Jim Woolsey, who spearheads this thing, has said. "The Wright Brothers have flown." We have moved out of the research phase to implementation.
You should take into account seasonal demand changes. Last March the US used 642,688,000 barrels of oil and petroleum products. This March we used 641,559,000. A decline of 0.1% (March is the latest data point) May I suggest U.S. Total Crude Oil and Petroleum Products Product Supplied. Do not look only at Crude Oil, we import gasoline, Kerosene and Distillates as well.
Ethanol doubled last year and is set to double again this year
You are comparing products by percentages when the quantities differ by several orders of magnitude. Try using gallons. With the lower energy level of ethanol, you would be even better off comparing BTU's as it takes more ethanol to move a vehicle the same distance as gasoline.
GM and Ford are both retooling to produce a very different fleet of American cars
Great. More choices can only be better, as long as it is choices and not government forcing different products.
But you still do not address the issue of what it takes to produce ethanol in the quantities you discuss. I do not believe you understand the size of the undertaking you suggest. It is not just a matter of willingness and expense.