How can algae be used as a fuel source?

Algae fuel is any fuel made using algae. Algae are a type of simple organism, of which most are photosynthetic (they get their energy from the sun). The smallest algae are unicellular, the largest are the seaweeds that make up kelp forests.

Some types of algae use sunlight to make oil, and if these algae are harvested and the oil extracted from them, the oil can be used in a variety of ways, including as a replacement for petroleum derived diesel fuel.

Whatever portion of the algae which is not oil, is carbohydrates and proteins. These carbohydrates and proteins can be processed to produce butanol, a oily, energy-dense alcohol, which can be used as a direct gasoline substitute.

The oil from algae can also be converted (using the same processes that are used on petroleum) into other types of fuel, such as biogasoline, and aviation biofuel.

The non-oil components of algae can also be converted to other fuels besides butanol (although that's one of the most valuable producable fuels), such as methane and ethanol.