Transesterification of a vegetable oil was conducted as early as 1853, by scientists E. Duffy and J. Patrick, many years before the first diesel engine became functional. Rudolf Diesel's prime model, a single 10 ft (3 m) iron cylinder with a flywheel at its base, ran on its own power for the first time in Augsburg, Germany on August 10, 1893. In remembrance of this event, August 10 has been declared International Biodiesel Day. Diesel later demonstrated his engine and received the "Grand Prix" (highest prize) at the World Fair in Paris, France in 1900. This engine stood as an example of Diesel's vision because it was powered by peanut oil—a biofuel, though not strictly biodiesel, since it was not transesterified. He believed that the utilization of a biomass fuel was the real future of his engine. In a 1912 speech, Rudolf Diesel said "the use of vegetable oils for engine fuels may seem insignificant today, but such oils may become, in the course of time, as important as petroleum and the coal-tar products of the present time." [3]

During the 1920s diesel engine manufacturers altered their engines to utilize the lower viscosity of the fossil fuel (petrodiesel) rather than vegetable oil, a biomass fuel. The petroleum industries were able to make inroads in fuel markets because their fuel was much cheaper to produce than the biomass alternatives. The result was, for many years, a near elimination of the biomass fuel production infrastructure. Only recently have environmental impact concerns and a decreasing cost differential made biomass fuels such as biodiesel a growing alternative.