WASHINGTON, March 4 (Reuters) - The reeling U.S. ethanol industry could create 136,000 jobs and inject $24 billion into the economy each year if the government hikes the allowable blend of ethanol with gasoline to 15 percent from 10 percent, trade group Growth Energy said on Wednesday.

Volatile corn and oil prices and slumping demand for fuel have slammed the ethanol industry. Growth Energy and other proponents want to boost demand for their alternative fuel, made mainly from corn.

"The federal government can act right now to increase the amount of ethanol blends in the nation's fuel supply," said Jim Nussle, a former congressman from Iowa who advises the group.

The United States could consume 20.4 billion gallons of ethanol per year if the Environmental Protection Agency increased the allowed blend rate to 15 percent, based on annual gasoline use of 136 billion gallons, according to a North Dakota State University study done for Growth Energy.

That would require the United States to build another 6 billion gallons of capacity, or 60 ethanol plants each producing 100 million gallons per year, Nancy Hodur told a news conference.

Current industry capacity is 10.3 billion gallons per year, with another 1.9 billion gallons idled, 1.5 billion gallons under construction and room at existing plants for expansion of 0.6 billion gallons, she said.

Building the plants would create 262,000 jobs and $36.8 billion in economic benefits, Hodur said.

Longer term, the expansion would create 136,000 jobs and add more than $24 billion to the economy, she said. (Reporting by Roberta Rampton; Editing by David Gregorio)