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Wired has a good overview of bio-fuels - "Researchers hoping to ease America's oil addiction are turning sawdust and wood chips into bio-oil, a thick black liquid that could become a green substitute for many petroleum products. Bio-oil can be made from almost any organic material, including agricultural and forest waste like corn stalks and scraps of bark. Converting the raw biomass into bio-oil yields a product that is easy to transport and can be processed into higher-value fuels and chemicals." - Link.

Related:
Making Biodiesel by Rob Elam. The best way to learn how to make your own backyard biodiesel is to start with a one-liter batch. It's easy to make a small batch that will work in any diesel engine. You won't need any special equipment--an old juice bottle will serve as the "reactor" vessel--and on such a small scale, you can quickly refine your technique and perform further experiments. MAKE 03 - Page 68.