(Chevron invested in Solazyme. Exxon Mobil has a relationship in the biofuels space with Synthetic Genomics. An earlier version of the article misstated this.) NEW YORK ( TheStreet) -- To many investors, biofuels have been one big dry hole. Earlier this year Bloomberg reported there had been $7 billion in investments made by the oil sector in the biofuels industry since 2005. Most investors, looking at the field, see companies using food crops as feedstocks, competitive only because of subsidies from government. Even algae fuel seems a loser, to hear the oilpatch tell it. Chevron ( CVX) backed Solazyme ( SZYM), a company that has yet to make money, while Shell ( RDS.A) backed Codexis ( CDXS), an enzyme company from which it recently parted company. But is the situation really that dire? Biofuelsdigest has been reporting on two "next generation" algae companies that claim to be delivering 10 times the yield of first-generation biofuels: Joule Unlimited has put $100 million in venture capital ( according to Crunchbase) into a system in which engineered micro-organisms consume carbon dioxide from wastewater to produce fuel. It recently commissioned a demonstration plant in New Mexico called SunSprings as a proof of concept. Algenol Biofuels, with $25 million in venture capital (again according to Crunchbase) has a four-acre plant in Florida producing ethanol from algae at the reported rate of 7,000 gallons per acre. Jim Lane of Biofuelsdigest writes that Algenol is targeting full-scale production at costs of $1.50 to $1.70 per gallon, while Joule thinks it can deliver its products at $1 per gallon. This compares with present gasoline prices of $2.93 a gallon, wholesale. It's called "no kill farming," a closed-loop system that uses bioengineering to create a system in which waste feeds algae and fuel is continually harvested as the waste product of the organisms. Unlike solar power, biofuels require no re-engineering of present car engines, which already run on the kind of oils and alcohols these companies are producing. But let's do some math. The U.S is presently using about 135 billion gallons of gasoline a year, according to the Energy Information Administration, down 7% from its 2007 peak. Figure CAFE standards mandating that cars get 54 miles per gallon could cut that figure in half by 2025. Assume a 10% increase in population and use the CAFE targets -- you get estimated consumption of 68 billion gallons of fuel in that year. If you go to a mix of 30% ethanol, that's a market of 20 billion gallons.