It was announced today that the Department of Energy (DOE) along with the International Energy Agency would be releasing 60 million barrels of oil over the next month.

The U.S. will be contributing half of the oil as the two groups attempt to offset the drain on available oil caused by all the conflict in the Middle East.

The U.S oil contribution will come out the Strategic Petroleum Reserve (SPR) which currently holds 727 million barrels of oil.

The DOE reports that the disruption in Libya alone is responsible for a loss of about 1.5 million barrels each day. With gas prices rising steadily due to the various disruptions in the Middle East it is expected that this contribution from the SPR will help drive gas prices at the pump down in the relatively near future.

Based on the current average price of gas in the U.S. being $3.53 per gallon, the DOE is expecting that the typical American household will spend an extra $700 on gas this year compared to last year. The total average cost of gas for U.S. family this year is expected to run about $3,235 representing a 28% increase over 2010.

While that might not seem devastating to most families, it does represent a sizable chunk of money that is going primarily into the pockets of foreign countries instead of back into the U.S. economy where the bulk of it would otherwise end up.

The DOE is predicting a sharp increase in gas prices over the next couple weeks in the range of about 10 cents per gallon to drive the point home. They go on to say that there’s about a 25% chance that gas prices will continue to go up throughout the year to the point that they are above $4 by September.

If this proves true it might mean that eco-friendly vehicles like electric cars and hybrids are going to start making even more sense than ever

Algae biofuels have been one of several beacons of hope for those looking to reduce or end our dependence on oil. In fact last year the DOE gave $24 million to a partnership between Shell Oil and HR Biopetroleum for reseach in algae biofuels.

Now it seems that Shell has dropped that direction of research stating that “In keeping with Shell’s portfolio approach to the research, development and commercialization of advanced biofuels, this decision will allow Shell to focus on other options that have shown a better fit with Shell’s biofuel portfolio and strategy.”

With a major player like Shell deeming algae-based biofuels a dead-end, does that mean that the algae biofuel dream is dead? Not necessarily. These does seem like the nail in the coffin of lipid-based algae biofuels that require the process of separating the algae from the fuel. The conversion of Algae to ethanol may still prove to be a viable alternative fuel production method for the foreseeable future.

The Department of Energy is licking its lips at the prospect of finding a way to turn algae into biofuel in a financially viable way so they have just invested $25 million to spur that research on.

Algue biofuels have represented a bit of a holy grail to the biofuel industry as it can yield 100 times more biofuel per acre than land-based sources like soy or corn. While this sounds nice, the cost of harvesting and using currently makes algae farming for biofuel cost-prohibitive.

Six of the DOE’s $25 million will go to an Arizona State University team who will be looking at the best ways to use algae biofuels. A University of California, San Diego will get $9 million to work on developing algae strains that are best for biofuel. The remaining money will go to Cellana, LLC and their work on developing large-scale production processes.