Ethanol producers are also responsible for changes in ethanol and corn prices. "Ethanol is having a positive impact on gasoline prices," Aventine CEO Ron Miller noted. However, it's not quite cheap to buy these stocks. Aventine fetches 19 times projected 2008 operating earnings, and VeraSun, 21 times estimated profits. Pacific Ethanol is expected to came with a loss this year.

The benefits of using ethanol are not difficult to observe. Oil refiners get a credit of 51 cents per gallon of 10% ethanol blended with 90% gasoline. In addition, more than half the gasoline sold in the U.S. now contains ethanol, following a federal dictate. The blend between ethanol and gasoline is also economically justified. Ethanol now costs $2.50 per gallon, or about $2.00 a gallon to refiners after the federal subsidy. The wholesale price of gasoline is above $3.30 a gallon. This help refiners save about $1.30 per gallon by using ethanol rather than pure gasoline. Even compared with higher corn prices, results prove profitability for ethanol producers.

On the bad side, Wall Street is concerned that ethanol profit margins, now 40 to 50 cents a gallon, will narrow in late 2008 and 2009 causing a lot of ethanol on the market. On the other hand, analysts forecast little new supply on the market after 2009 as a result of the depressed valuation of ethanol producers and difficult challenging credit markets conditions.

Eliza Popescu is a financial writer for the online investment advisory service Investor's Observer.