Several companies and government agencies are funding efforts to reduce capital and operating costs and make algae fuel production commercially viable. The production of biofuels from algae does not reduce atmospheric carbon dioxide (CO2), because any CO2 taken out of the atmosphere by the algae is returned when the biofuels are burned. They do however potentially reduce the introduction of new CO2 by displacing fossil hydrocarbon fuels.

The vegoil algae product can then be harvested and converted into biodiesel or green-colored crude oil. The algae’s carbohydrate content can be fermented into bioethanol and biobutanol.

Currently most research into efficient algal-oil production is being done in the private sector, but predictions from small scale production experiments bear out that using algae to produce biodiesel may be the only viable method by which to produce enough automotive fuel to replace current world diesel usage.

Microalgae have much faster growth rates than terrestrial crops. The per unit area yield of oil from algae is estimated to be from between 5,000 to 20,000 US gallons per acre per year (4,700 to 18,000 m3/km2·a). This is 7 to 30 times greater than the next best crop, Chinese tallow (700 US gal/acre·a or 650 m3/km2·a). Incorrect, (reference Wiki entry for Chinese Tallow).

Studies show that some species of algae can produce up to 60% of their dry weight in the form of oil. Because the cells grow in aqueous suspension, where they have more efficient access to water, CO2 and dissolved nutrients, microalgae are capable of producing large amounts of biomass and usable oil in either high rate algal ponds or photobioreactors. This oil can then be turned into biodiesel which could be sold for use in automobiles. Regional production of microalgae and processing into biofuels will provide economic benefits to rural communities.

Butanol can be made from algae or diatoms using only a solar powered biorefinery. This fuel has an energy density 10% less than gasoline, and greater than that of either ethanol or methanol. In most gasoline engines, butanol can be used in place of gasoline with no modifications. In several tests, butanol consumption is similar to that of gasoline, and when blended with gasoline, provides better performance and corrosion resistance than that of ethanol or E85

See also:
http://en.wikipedia.org/wiki/Algae_fuel
http://www.juliantrubin.com/encyclopedia/renewable_energy/algae_fuel.html

Source: Wikipedia (All text is available under the terms of the GNU Free Documentation License and Creative Commons Attribution-ShareAlike License.)