Most companies targeting renewable fuels failed fast and hard after the Great Recession, which caused oil prices to plummet from an all-time high of $147 per barrel in July 2008 to a several-year minimum below $40 per barrel in 2009. Oil prices have since resumed their climb to triple digits, but the economics of the fuel markets haven't changed. The volumes are so massive and the selling prices are so incredibly low that few companies originally promising next-generation renewable fuels can profitably compete with petroleum-based incumbents.

Synthetic biology pioneers Solazyme (NASDAQ:SZYM) and Amyris (NASDAQ:AMRS) have surely discovered that, which is exactly why both have pivoted to smaller-volume, higher-margin specialty chemicals. It will be quite some time before either can profitably produce drop-in fuels with their industrial biotech platforms. However, that doesn't mean the pair can't help wean the world off petroleum fuels. In fact, Solazyme and Amyris can save more energy consumption with products targeting efficiency than they ever could by selling renewable fuels to consumers with their current production capacities.

Encapso targets drilling inefficiencies
Solazyme recently launched a new product line called Encapso, which consists of biodegradable lubricants that are being sold into the oil and gas drilling fluids market. When new oil and gas wells are drilled, engineers must constantly monitor the depth of the well and the amount of friction encountered by the drill head. Simply put, friction reduces the efficiency of a drilling operation and requires more torque to punch through the resistance. Engineers combat friction by adding lubricants to the bore hole, but getting the lubricants to the precise location needed is challenging. As a result, the effectiveness of lubricants is often degraded as they diffuse into the surrounding rocks and away from friction areas.

The newest product lineup from Solazyme makes those frustrations a thing of the past. As the name and producer suggest, Encapso is an oil product encapsulated within an algal cell. That comes with two major advantages. First, the encapsulated oil is only released when friction ruptures the cell. That reduces oil loss through diffusion and allows unused Encapso to be recovered and reused for other jobs.


Source: Solazyme.

Additionally, it provides engineers with a targeted friction reduction tool that reduces torque needed to break resistance. In a field test in the Three-Forks Formation, Encapso increased the rate of penetration by over 44% and allowed engineers to drill further in six days than could be achieved previously in nine days. Significantly reducing the energy needed to drill each well will give Encapso a major advantage in the competitive oil and gas drilling markets. 


Source: Solazyme.

The second advantage to an encapsulated oil is increased margin -- music to investors' ears. Solazyme puts Encapso right behind cosmetics on the margin scale, which is likely due not to increased selling prices, but to reduced production costs. Since the oil product from fermentation is meant to be encapsulated in the cell, Solazyme can skip the downstream recovery step. That also saves costs from shipping unfinished oil products from its Clinton, Iowa, facility to the Galva, Iowa, facility that separates the oil and biomass. The two facilities are 300 miles away.

Liquid Farnesene Rubber targets fuel economy
Amyris may already be producing renewable fuels in Brazil, but its biggest contribution to reducing energy consumption could be coming to a car near you by the end of this year. The company has enlisted the help of three of the world's leading tire manufacturers to replace a major component of their tires with its Liquid Farnesene Rubber and perform year-long road tests for performance and safety. Those tests should be wrapping up later this year -- and CEO John Melo isn't shy about discussing the market's enthusiasm for the product. In fact, Melo believes tire manufacturers will fund the completion of a half-completed 65,000 metric-ton-per-year facility in Brazil, which will be fully dedicated to the tire market, by 2016.

In all, 13 of the world's largest tire manufacturers are expected to use Amyris' Liquid Farnesene Rubber in new tire formulations. Why? It has a much lower viscosity than the chemical it's replacing, which increases throughput in the manufacturing process. That saves time, energy, and, most importantly, money. Better yet, new tire formulations will save considerable fuel costs for consumers by boosting fuel economy. Exact numbers haven't been released, but if the new tires are better than current-generation low-rolling resistance tires available today, they should save more than 2,600 miles' worth of fuel over their lifetime! In other words, they will likely pay for themselves in fuel costs. 

Foolish bottom line
Solazyme's Encapso and Amyris' Liquid Farnesene Rubber are just two examples of products offered by the pair that will reduce energy consumption. Indeed, both will directly target the fuels market, albeit with a carefully orchestrated approach. Solazyme will initially produce the higher value products found in a barrel of oil -- and products not within reach of today's refineries -- for blending into larger volumes of fuels, while Amyris will soon produce niche jet fuel once it gains approval later this year. Until they harness the power of their platforms for directly producing fuels, however, investors should realize the power of non-fuel products and their ability to reduce energy consumption. Fuel not required.

OPEC is absolutely terrified of this game-changer
One day, OPEC will be forced to adjust to industrial biotech platforms enabled by synthetic biology, such as those developed by Solazyme and Amyris. While that day could arrive much sooner with non-fuel products, are they something that keeps OPEC awake at night now? An exclusive, brand-new Motley Fool report reveals the company we're calling OPEC's Worst Nightmare. Just click here to uncover the name of this industry-leading stock, and join Warren Buffett in his quest for a veritable landslide of profits!

Maxx Chatsko owns shares of Amyris. Check out his personal portfolio, his CAPS page, his previous writing for The Motley Fool, or his work for SynBioBeta to keep up with developments in the synthetic biology industry.

The Motley Fool owns shares of Solazyme. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.