As of 2008, such fuels remain too expensive to replace other commercially available fuels, with the cost of various algae species typically between US$5–10 per kilogram.[citation needed] But several companies and government agencies are funding efforts to reduce capital and operating costs and make algae oil production commercially viable

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Algae fuel, also called algal fuel, oilgae,^[1] algaeoleum or third-generation biofuel,^[2] is a biofuel from algae.

High oil prices, competing demands between foods and other biofuel sources and the world food crisis have ignited interest in algaculture (farming algae) for making vegetable oil, biodiesel,bioethanol, biogasoline, biomethanol, biobutanol and other biofuels. Among algal fuels’ attractive characteristics: they do not affect fresh water resources,^[3] can be produced using ocean andwastewater, and are biodegradable and relatively harmless to the environment if spilled.^[4][5][6] Algae cost more per pound yet can yield over 30 times more energy per acre than other, second-generation biofuel crops.^{[citation needed]} One biofuels company has claimed that algae can produce more oil in an area the size of a two car garage than a football field of soybeans, because almost the entire algal organism can use sunlight to produce lipids, or oil.^[7] The United States Department of Energy estimates that if algae fuel replaced all the petroleum fuel in the United States, it would require 15,000 square miles (40,000 square kilometers), which is a few thousand square miles larger than Maryland.^[8] This is less than 1/7th the area of corn harvested in the United States in 2000.^[9][10]

During photosynthesis, algae and other photosynthetic organisms capture carbon dioxide and sunlight and convert it into oxygen and biomass. Up to 99% of the carbon dioxide in solution can be converted, which was shown by Weissman and Tillett (1992) in large-scale open-pond systems. The production of biofuels from algae does not reduce atmospheric CO2, because any CO2 taken out of the atmosphere by the Algae is returned when the biofuels are burned. They do however eliminate the introduction of new CO2 by displacing fossil hydrocarbon fuels.

As of 2008, such fuels remain too expensive to replace other commercially available fuels, with the cost of various algae species typically between US$5–10 per Kg.^{[citation needed]} But several companies and government agencies are funding efforts to reduce capital and operating costs and make algae oil production commercially viable.^[11]