yes the germans used it in ww2.
the problem was they could not make it fast enough, it's been theorized that if they were able to produce enough if it they would of lasted long enough to bring jets and the other weapons they had in the wings online.
Which reminds me of the Haber-Bosch process developed just prior to WW1 that freed the Germans from dependance on imported rock nitrates for explosives.

"The Haber process now produces 500 million tons of artificial fertilizer per year, mostly in the form of anhydrous ammonia, ammonium nitrate, and urea. 1% of the world's energy supply is consumed in the manufacturing of that fertilizer (Science 297(1654), Sep 2002). That fertilizer is responsible for sustaining 40% of the Earth's population."

http://en.wikipedia.org/wiki/Haber_process

Uses natural gas.
Estimated to have roughly doubled the amount of biologically available nitrogen on the planet.

Though it is true that Germans had shortages of fuel near the end due to the success of British and U.S. bombing campaigns, the binding constraint (i.e. most severe bottleneck) on the Luftwaffe at the end was pilots. Almost all their good pilots had been captured or killed, and at the end the Generals were flying along with seventeen-year-old kids with a hardly any skills compared to the expert pilots the Germans had in the early 1940s. The Luftwaffe had more Me262s than pilots skilled enough to fly them, and because they could stay airborne for only about forty-five minutes they did not guzzle much kerosene. The jets were shot down in large numbers by slower propeller aircraft, because the experienced British and U.S. pilots (who scornfully called the planes "blowjobs") were much better than all but a very few German pilots at the end.

Interestingly, the Germans had plenty of ethanol and liquid oxygen to fuel the V-2s until very close to the end of the war.

Which reminds me of an old Steve Allen joke:

The answer is: he shot down 23 Messerschmidts.

What was the question? Why was Hans Schmidt kicked out of the Luftwaffe?

===========

I get blank stares when I tell it to young people.

Oh my god, I thought you were a young person. davebygolly, I always knew you were mature from your posts, but I never figured above 40. Holy Christ was I not paying attention. I still don't get the joke. Who the fuck is Hans Schmidt? I thought I knew something about WWII. Oh wait, half those Krauts were named Hans Schmdt? Is this like Dick Hurtz? Seriously, could you explain the joke so I don't have to google-detect it. I feel like such a jackass.
I guess this guy shot down 23 friendly planes and that's why was kicked out of Luftwaffe :)
Took me some time to understand the humor though.
I can't believe where you led me. This is something else.