Some people believe that over the long term, cellulosic ethanol may be a candidate for our long term supply of transportation fuel (hydrogen is another candidate). Cellulosic ethanol is a type of ethanol that is produced from a great diversity of biomass including waste from urban, agricultural, and forestry sources. Examples include corn stover, wheat straw, leaves, wood chips, sawdust, and switchgrass.  Unlike normal ethanol, whose original raw material are sugars and starches (often from corn or sugar cane), cellulosic ethanol's starting raw material is cellulose. Using cellulose has the advantage of being able to use a wider supply of raw material, ones that are less likely to compete with the world's food supply, and in the end materials that are lower in cost. 

In the US for example, the use of corn ethanol alone is not believed to be a total replacement for petroleum.  Many projections have been done and certainly a decent percentage of petroleum consumption can be replaced but it would take a huge increase in corn production to completely replace oil.  Many of the projections may be pessimistic because they don't account for the amount of idle land that exists, future process efficiency improvements, possible increases in fuel efficiency (especially if fuel prices rise), and the fact that an increase in price will certainly stimulate corn production.  Neverthess, it is still unlikely that corn can feasibly replace more that a modest fraction of petroleum.

Commercial scale production of cellulosic ethanol is in its infancy.  The challenges are to find feasible technical process approaches (primarily breaking down the cellulosic feedstock into a fermentable material) and to have acceptable economics.  Visit NREL's website to learn about some of the challenges and opportunities for cellulosic ethanol at http://www1.eere.energy.gov/biomass/ethanol.html.