Ethanol is now generally be added to gasoline, which is good because it is displacing MMT, which gummed up catalytic converters and engine control systems.
Some of the ethanol does come from grain based alcohol but much also is imported from Brazil which uses sugar cane to produce ethanol. Sugar cane production is far more more efficient than grain based methods. Using corn you get about 25-30% more energy than you put into the process, so it is reducing oil consumption. With sugar cane the returns are much higher (300-400%) which is in the same ballpark as much of current North American oil production.
Current US legislation blocks large scale imports of cane based ethanol.
In the long run, grain based ethanol production is likely only an interim step. Most of the solar energy plants absorb goes into producing cellulose not the sugar and starch the seeds. If we used the cellulose in the rest of the plant instead of just the sugar and starch in the grain the energy payback would be much higher (competitive with oil). Most of the current infrastructure currently being built/used to produce ethanol from grains can be re-used with cellulose sources.