A CHIP a day keeps the wheels on this country school bus moving along.

With the price of fuel skyrocketing, residents in the tiny town of Gunning have come up with an environmentally friendly and cost-effective answer to running their school bus. They are turning used cooking oil from the local cafe into about 400 litres of biodiesel to power students' bus trips to and from school.

The man behind the movement is engineer Ned Stojadinovic, who said the biodiesel was 100 per cent recycled and cost only 30c a litre to produce while emitting zero emissions. He said the biodiesel-run bus would be saving between 15 and 18 tonnes of carbon emissions a year.

"It wouldn't take much to convert all diesel buses to biodiesel - all of the work has been done and the expense would be insignificant," Mr Stojadinovic said.

He started making fuel batches in his kitchen blender about five years ago but now produces the fuel needed for the school bus at a disused fuel depot.

Originally published as Town finds deep-fried fuel answer