President Donald Trump has allowed the use of cheaper red-dyed diesel, typically reserved for farm operations, to be used more broadly in an attempt to bring down record-high fuel costs.
Trump signed an executive order Monday evening stateside to temporarily allow truckers and farmers to use red-dyed diesel — which is exempt from highway fuel taxes — and deferred related taxes on the fuel through the end of this year.
The tax-free diesel is typically used by farm equipment, construction machinery, trucks and other off-road vehicles. It is therefore exempt from a 24.4 cent-per-gallon tax applied to diesel fuel sold for highway transportation.
Using dyed diesel in vehicles operated on public roads is considered illegal, and could result in fines for tax evasion. But several states this year have relaxed restrictions on the tax-exempt diesel to help Americans cope with surging fuel prices.
The U.S. national average price of diesel topped $6 a gallon in September for the first time ever, as fuel supply disruptions triggered by the conflicts in Ukraine and Iran pushed up transportation costs across the country. Americans are spending about $700 million more per day on gas and diesel than they did a year ago, according to Bob McNally, president of Rapidan Energy.
The White House said truckers could save more than $100 per fill-up.
The order also directed the Treasury Secretary, in consultation with the Department of War, to defer collection of the federal excise tax on highway diesel through the end of 2026, without interest or penalties, according to a fact sheet released by the White House. The Treasury is also directed to "explore pathways to eliminate the obligation to pay the deferred taxes" altogether.
The Trump administration cited tight global supply tied to the war in Ukraine and a lack of refining capacity as pushing up diesel prices and household costs. The Group of Seven nations also agreed to release 100 million barrels of diesel and crude reserves, after pressure from Trump who had floated a ban on U.S. exports of the fuel.