The conventional route to biodiesel consists of extracting oil from plants and converting it to the methyl esters of fatty acids that are present in the lipid-components, known as triglycerides. These esters as a mixture constitute biodiesel: a specific kind of biofuel. High oil-yielding strains of algae can be grown and dried and the oil extracted from the dry algal mass, before being similarly converted to biodiesel in a process called transesterification.
Removing the water from raw algae is a highly energy intensive process, and to minimise the overall energy costs of biofuel production from algae, a process called hydrothermal liquefaction may instead be employed in which the algae are not dried but heated under pressure such that the water they contain acts as a chemical reagent and solvent that breaks-down the algal cells and converts not only the oil (lipid) but the sugar and protein component into fuels such as liquid hydrocarbons, gaseous fuels like methane and a complex material called "bio-oil" with a similar energy content to crude oil.
Clearly, the design of engines will need to be adapted in order to use these alternative fuels directly, or they must be refined in a "biorefinery" along with those from other kinds of biomass. In both cases of new engines or biorefineries, there will be huge new engineering required and on a scale that can only be guessed at if really algae can be exploited to make a nation the size of the United States independent of cheap imported crude oil.
Nonetheless, there is a consortium (National Algae Association) in the U.S. that is actively seeking a future in which algae are grown on a large scale and converted to oil-alternative fuels. Certainly, it is likely that algae will become an essential component of the mix of means to keep transportation going by means other than crude oil.
The claims of the NAA are undoubtedly true, that ultimately the supply of petroleum must decline, oil prices will continue to be volatile with knife-edge consequences for the world economy, and a wholesale industry based on algae would provide precious and needed jobs and economic development in the U.S. The approach could be introduced on necessary levels for all nations and even a village "pressure cooker" to provide algal fuels for small communities.
A. Demirbas, "Use of algae as biofuel sources," Energy Conversion and Management, 2010, 51, 2738-2749.