President Donald Trump has signed an executive order aimed at reducing diesel costs for truckers and farmers by temporarily expanding highway use of tax-exempt dyed diesel.
Diesel Prices Remain Near Record Levels
The White House says the policy will defer the federal diesel tax on dyed fuel used on roads through the end of 2026, with no interest or penalties during the deferral period. The move comes as US diesel prices remain far above their levels before the latest supply shock.
The national average price of diesel reached a record $6.53 per gallon on September 22, according to AAA figures cited in the report. The average had fallen to around $6.32 per gallon by Monday, but diesel prices were still about 77% higher than at the start of the year.
Before the latest surge, diesel was selling for around $3.76 per gallon. The White House says disruptions linked to the Russia-Ukraine war and limited refining capacity have contributed to tighter global fuel supplies.
Red-Dyed Diesel Will Be Available for Highway Use
Red-dyed diesel is chemically the same as regular diesel. The red dye identifies fuel that is normally sold without the federal highway tax for uses such as agricultural machinery and construction equipment.
Under the new order, the administration is temporarily suspending the restriction that limits dyed diesel to off-road use. The White House says the federal tax on the fuel used on roads will be deferred through the end of the year.
The federal diesel excise tax is currently 24.4 cents per gallon.
Truckers Could Save Money on Large Fuel Purchases
The potential saving becomes more noticeable for vehicles with large fuel tanks. An 18-wheeler filling up with 250 gallons of diesel would currently face around $61 in federal diesel taxes alone, based on the 24.4-cent rate.
The White House says savings could exceed $100 per fill-up in states that also adopt comparable tax policies. The actual amount saved will depend on the state where the fuel is purchased and whether that state changes its own rules.
States Are Taking Different Approaches
The federal order does not automatically remove every state diesel tax or requirement. Several states have already taken steps to increase the availability of dyed diesel for highway vehicles.
According to ClearView Energy Partners, 10 states, including Texas, Oklahoma and Alabama, took action between September 23 and October 2. Those states account for roughly one-third of US diesel sales, according to the research firm.
The White House is encouraging additional states to adopt similar policies.
Farmers Could Also Benefit
Farmers rely heavily on diesel for tractors, equipment and transportation. Higher diesel costs can also raise expenses associated with moving agricultural products and bringing fertilizer and other supplies to farms.
The administration says expanding access to tax-exempt dyed diesel could therefore reduce some fuel expenses for the agricultural sector. The effect will vary depending on state rules and how much fuel individual farms use.
Experts Question How Much Prices Will Fall
The policy could reduce the tax component of diesel costs, but industry analysts caution that it does not resolve the broader supply problem. Patrick De Haan, head of petroleum analysis at GasBuddy, described the policy as unlikely to transform the diesel market on its own.
Andy Lipow, president of Lipow Oil Associates, said suspending fuel taxes could save consumers money in the short term, while leaving the underlying refinery shortage unresolved.
The distinction matters because the largest recent increases in diesel prices have been linked to fuel supply and refining constraints, rather than taxes alone.
Global Refinery Disruptions Remain a Problem
The US diesel market is facing pressure from disruptions affecting refineries and fuel exports around the world. Refineries in parts of the Middle East and Russia have been damaged during the ongoing conflicts, while China has restricted some fuel exports to protect domestic supplies.
US refineries have been operating at high levels as they try to compensate for the reduced international supply. That leaves limited room for a rapid increase in production if global disruptions continue.
