The good news: Oil doesn't have to rise that much more for cellulosic ethanol to become economically viable.

The bad news: You people in the labs have a lot of work ahead of you.

Sandia National Labs will soon release a report on cellulosic ethanol and what sort of barriers need to be knocked down so that cellulosic can become at least a 75 billion gallon a year business, according to the Wall Street Journal's Environmental Capital blog. The study states that cellulosic can't become competitive with oil unless oil stays above $90 a barrel.

While that sounds high, it isn't stratospheric. Oil is at $70 now and many economists predict a persistent rise in price as economies improve in China, India and the U.S. (The U.S. consumed 137.8 billion gallons of petroleum in 2008 and overall demand for petroleum and substitutes will likely increase.) 75 billion gallons of cellulosic could cut petroleum-associated emissions by 25 percent.

To get there, however, will require scientific breakthroughs. "Producers have to get better at squeezing more juice out of the same amount of biomass, and they have to make sure they’ll have all those plants available in the first place," Keith Johnson of the WSJ wrote. And, of course, most cellulosic ethanol companies are still in the press release n' prototype stage.

The full report should be an interesting read.