In what way are you saying ethanol causes more fuel comsumption? If you mean that if all the fuel that goes into farming corn is included, than yes, ethanol is at best a wash in replacing oil. But that just means using corn for ethanol is a bad idea.
Here is my goal:
Right now we import about 45% of our oil. With new drilling, yes we can replace some of that 45%, but I am not convinced that we can replace it all, for generations to come. But we do have abundant natural gas and coal, and if we convert those to liquid fuels, we can extend the life of our petroleum liquid fuels and become energy independent, while creating jobs here to create that energy.
We do not have an infrastructure for natural gas cars, but we already have plenty of E85 cars. The milage is usually less than the equivalent gasoline powered cars. Here is an example:
For a 2012 Ford Escape AWD FFV 6 cyl, 3.0 L, Automatic 6-spd, Regular Gas or E85, the highway milage for gasoline is 23, and the E85 is 17, which is about 24% less. (Ford E85 vehicles)
However, if you can also produce ethanol cheaper, and one company claims 25%-35%, or $60 per barrel equivalent, then you can make up a lot of the lost milage with cheaper fuel prices.
Celanese Says Ethanol-From-Coal Process Is a ‘Game-Changer’
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Celanese Partners to Develop Ethanol in Indonesia
And finally, is it an absolute limit that an E85 vehicle will have lower fuel economy than a gasoline equivelent? Possibly not, as the Wikipedia article on E85 claims:
Because ethanol contains less energy than gasoline, fuel economy is reduced for most 2002 and earlier American FFVs (flexible-fuel vehicles) by about 30% (most after 2003 lose only 15-17%, or less) when operated on E85 (summer blend). Some of the newest American vehicles can achieve only a 5-15% loss, but as recently as 2007 the Environmental Protection Agency stated on its website that several of the most current American FFVs were still losing 25% fuel efficiency when running on E85. Some Swedish-engineered cars with engine-management systems provide much better fuel economy on E85 than on gasoline; for example, the Saab Aero-X turbocharged concept car produces higher fuel economy and higher power on 100% ethanol (E100) than gasoline through using a higher-compression-ratio engine with advanced SAAB engine-control computers. Another car that has higher power on ethanol is the Koenigsegg CCXR, which on ethanol is the third-most powerful production car, with 1020 hp. According to the manufacturer, this is due to the cooling properties of ethanol. Still, for almost all American-made FFVs, more E85 is typically needed to do the same work as can be achieved with a lesser volume of gasoline. This difference is sometimes offset by the lower cost of the E85 fuel, depending on E85's current price discount relative to the current price of gasoline. As described earlier, the best thing for drivers to do is to record fuel usage with both fuels and calculate cost/distance for them. Only by doing that can the end-user economy of the two fuels be compared.
From: E85