Biodiesel is the name for a variety of ester-based oxygenated fuels made from soybean oil or other vegetable oils or animal fats. It is usually made from vegetable oil, and involves a chemical reaction. The resulting fuel is 100% compatible with conventional diesel fuel, and is similar in gel point and viscosity. In addition, there are several benefits over conventional diesel fuel, which can be realized. These include better lubricity, less hazardous emissions, more applications, and cost benefits in various forms.

Better lubricity is helpful when operating in an internal combustion engine. The moving parts of such an engine are subject to less wear from constant operation when the fuel itself helps to lubricate the movement of these parts.

Biodiesel has been proven to be better overall on the emissions front; emitting over 90% less unburned hydrocarbons, half the carbon monoxide, and almost a third less particulate matter (soot).

Biodiesel can be used in a wide-range of applications, including a direct substitute (with no modifications required) for home-heating fuel, diesel fuel in an internal combustion engine, and many kerosene-powered heating devices.

The cost benefits of biodiesel manifest themselves in many forms. One benefit is that it can be made from low-cost, agriculture grade vegetable oil, which can be much cheaper than petroleum-based fuels, depending on quantity of production. Another is that this fuel can be made and used free and clear of all government taxation, and is not subject to the cost-regulatory actions of OPEC and other fuel commissions. The most expensive part of the bio-diesel process is the methanol used in the reaction, which can be fairly cheap with proper quantity and source. As well, it is possible to recover much of the methanol used in the reaction and reuse it.

Biodiesel is produced by combining methyl alcohol (methanol) and sodium hydroxide (lye) in proper proportions. The resulting mixture (sodium methoxide) is then mixed in proper proportions of vegetable oil (new or recycled and filtered) under heat. A reaction takes place, known as a transesterification, in which esters from the vegetable oil molecules are relocated to the methanol's. The result is a two-product suspension: glycerin and biodiesel. These two products can be separated using a variety of methods, the simplest being separation by gravity, and the glycerin drained off the bottom.