Liquid fuels for transportation are the top use of oil in America and also the hardest to replace with a renewable source. My good friend Jim is a strong proponent of using Algae to produce Biodiesel. Honestly, I think it is the only potential replacement on the horizon that is renewable and solar based. Here is his one page summary on the topic.

Bio-diesel from Algae: A renewable liquid fuel for transportation
U.S. transportation: cars, ships, trains, trucks, and aircraft, are 98% reliant on oil supplies for power. No energy source now, or in the foreseeable future, can match oil's energy density, ease of distribution, safety, or simplicity of use. The world's drilled oil is being depleted, yet a renewable oil substitute is now being harvested from crops like soybeans and rapeseed, both in Europe as well as here in Colorado http://www.gobluesun.com/index.html. The oil in the crops is merely pressed out and processed with 10% alcohol to become suitable for most of today's diesel engines. In use, biodiesel produces much lower smoke emissions than drilled oil, has a higher lubricity that reduces wear, can utilize a catalytic converter as it contains no sulfur, and recycles CO2 from use-cycle back to growth-cycle contributing little to global warming.

While using soybean and rapeseed to produce Biodiesel is promising, large scale displacement of existing crops on land needed for food or forage production is not. Requiring oil based fertilizers and high quality irrigation water also reduce economic and environmental attractiveness.

Fortunately, a study on harvesting oil from algae grown in very shallow ponds was performed by Colorado's National Renewable Energy Laboratories (NREL) between 1978 and 1996. The NREL Aquatic Species Program http://www.nrel.gov/docs/legosti/fy98/24190.pdf collected and experimented with various species of algae and found that under certain conditions some algae could generate up to half their body weight in oil. From 1988 to 1990 NREL performed experiments in Roswell NM where shallow open ponds of algae were able to produce 10 to 50 grams of oil per day per square meter of pond surface area. Translated, this is 5,500 to 27,000 gallons of biodiesel per surface acre per year. Funding for this NREL program was discontinued by the federal government in 1997; however, researchers increasingly believe development of large scale algae farming is technologically and economically practical in today's energy climate.

Land productivity comparison in growing Biodiesel: http://en.wikipedia.org/wiki/Biodiesel
• Soybean: 40 to 50 US gal/acre/year• Rapeseed: 110 to 145 US gal/acre/year (Canola oil) • Mustard: 140 US gal/acre/year • Palm oil: 650 US gal/acre/year (tropical climate) • Algae: 10,000 to 20,000 US gal/acre/year

Components of a modern algae biodiesel operation:
Ample sunlight to provide energy to the oil through photosynthesis
+ Saline or brackish low quality water found on waste lands that won't support crops
+ Algae seed stock enhanced through bioengineering yet non-dominant in the wild
+ Agricultural run off, livestock waste, or municipal sewage nutrients (get rid of waste)
+ 10% transesterification alcohol from fermenting algae waste or sugar/cellulose crops
+ CO2 from the air, fermentation, or from power plants (especially coal w/CO2 credits)
+ Modern technology for containing algae, harvesting and refining the oil
= Biodiesel oil compatible with conventional vehicles and distribution systems.

The University of New Hampshire projected http://www.unh.edu/p2/biodiesel/article_alge.html that the entire U.S. requirement for transportation fuel, 140 billion gallons/year, could be met by harvesting biodiesel from algae. This would require $300 billion to build the infrastructure, 15,000 square miles of scrub or desert land, and $50 billion in yearly operating costs. In perspective, amortized over 10 years, this would amount to 7% of our military budget, the land area is 0.4% of the U.S. total, and the operating cost is a fraction of our yearly bill for foreign oil.