Fuel ethanol, especially cellulosic ethanol, is likely to play an important role in renewable fuel development. This article reviews the main factors that currently drive fuel ethanol demand in the United States. In the short term, the phaseout of methyl tertiary butyl ether (MTBE) is important. In the long run, federal and state price support policies will play a dominant role in fuel ethanol demand. Both major demand factors and the current status of cellulosic ethanol manufacture are discussed. The current state of technology and the high capital cost for cellulosic ethanol production when compared with corn-based ethanol are major barriers to expanding the markets.