It doesn't seem possible to create a viable, alternative fuel source from algae, but it turns out that not only is it possible but it just might be the best option we have in the future.

Algae fuel, or Oilgae, uses different components of algae to create one of several types of fuels such biodiesel, ethanol or butanol.  The biomass of algae consists of 60% oil which can then be converted to a biodiesel, while the carbohydrate component of algae can be fermented to produce bioethanol.

At this point, algae production for use as an alternative fuel is still in development and there are several companies working away on the green slime to be the first to make just the right breakthrough to make this a profitable endeavor.  That is to say, we can make biofuels from algae right now, but it still costs quite a bit of money to do so.  Figures vary, but it seems the price per gallon of a viable fuel is still many times that of traditional fuels.