Most of the octane boost comes from aromatics in gasoline, not ethanol.
We had sufficient octane without the use of ethanol before the mandate.
Straight-run gasoline has an octane number of about 70. In other words, straight-run gasoline has the same knocking properties as a mixture of 70% isooctane and 30% heptane. Cracking, isomerization, and other refinery processes can be used to increase the octane rating of gasoline to about 90.
http://chemistry.about.com/cs/howthingswork/a/aa070401a.htm
So what would you replace ETOH with? 10% more oil? We have been burning ETOh since the 70s and Hitler used it to run a good portion of his war machine.