NOVELTY - A biofuel composition comprises aqueous emulsion having continuous phase comprising 50-95 wt.% of liquid oil of vegetable and/or animal origin; water-containing dispersed phase comprising 1-50 wt.% of water; 1-25 wt.% of hydroxyl-containing organic compound comprised of mono-, di-, tri-, or polyhydric alcohols; and 0.05-10 wt.% of emulsifier. The dispersed phase has water-containing droplets having average particle size of less than 20 microns. It is provided that when a monohydric alcohol is present there is tert-butyl alcohol and/or 2-4C alkylene glycol.    USE - For diesel engine (light and heavy duty diesel engines and in-use engines) used in automobiles, trucks, buses, locomotives, and stationary generators; and equipment that combusts fuels to generate heat, such as furnaces, boilers, burners (sleeve burners, natural-draft pot burners, force-draft pot burners, rotary wall flame burners, and air-atomizing and pressure generating burners) and power generating equipment, including gas or combustion turbines.    ADVANTAGE - The composition offers low product and manufacturing costs competitive with other fuels, particularly due to the presence of water in the composition. It does not exhibit high solvent power of methyl esters that are present in traditional biodiesel, which can cause problems with polymeric materials present in the storage systems, burners and engines, including linings, packing rings and seals; does not leave deposits in the storage tanks and fuel lines, thus reducing the need for frequent maintenance; and is renewable since it is based on vegetable and animal products that can be regularly replaced. Emission of nitrogen oxides, particularly undesirable pollutants, is reduced with respect to traditional biodiesel-based fuels, especially in view of the water and additive mixture.    DETAILED DESCRIPTION - INDEPENDENT CLAIMS are included for:    (1) a method of preparing an emulsified fuel composition comprising providing the biofuel composition; and mixing components of the biofuel composition under conditions of high shear, thus producing a dispersed phase comprising water-containing droplets having average particle size of less than 20 microns; and    (2) an emulsified fuel mixture prepared from 1500 parts vegetable or animal oil or fat; 900 parts water; 400 parts denatured ethanol 90 wt.%; 30 parts of hydrogenated castor oil and/or cetyl alcohol; and optionally 500 parts of a supplementary combustible liquid.