US
Trump opens highways to tax-free 'dyed diesel' as fuel prices squeeze farmers and truckers
An executive order lets drivers use red-dyed farm diesel on highways through year's end without IRS penalties. Analysts say the savings are real but the fuel is hard to find.
With less than a month until the midterm elections, the price of fuel has become one of the most pressing pocketbook issues in rural America, and the White House is reaching for an unusual lever: red dye.
President Trump this week issued an executive order allowing "dyed diesel," a fuel normally reserved for tractors, combines and construction equipment, to be used on public highways through the end of the year. The IRS will not penalize drivers who use it.
Why diesel is so expensive
Prices for oil products have climbed all year as fewer tankers move through the Strait of Hormuz during the Iran war. Diesel has been hit especially hard. Ukrainian strikes have knocked Russian refineries offline, and both Russia and China have cut diesel exports.
The U.S. average for a gallon of diesel hit a record $6.52 a few weeks ago, according to AAA. It has eased since, but it is still about $2.60 higher than a year ago. Because diesel powers the trucks, trains and farm machinery that move food and goods, analysts warn that high prices tend to ripple into grocery bills and inflation.
What 'dyed diesel' is
"Red-dyed diesel is diesel with red dye in it. That's it," said Will O'Neill, principal analyst at S&P Global Energy. Chemically, it is nearly identical to the fuel sold at most pumps. The dye marks it as off-road fuel, which is exempt from the 24.4-cents-a-gallon federal tax on highway diesel. Drivers caught using it on the road normally face an IRS penalty of $1,000 or $10 a gallon, whichever is greater.
Under the order, a farmer who fuels a tractor with dyed diesel can now legally fill a cargo van with it and drive produce to market. A handful of states have also said they will allow it on their highways. With state diesel taxes averaging about 35 cents a gallon, skipping both taxes could save roughly 60 cents a gallon.
Hard to find at the pump
The catch is availability. Jaime Brito, executive director of oil markets at Dow Jones Energy, noted that dyed diesel is not sold at most gas stations. "When was the last time that you went to a pumping station and you saw that one of the stations gave you the possibility to feed red diesel into your truck?" he asked. Most buyers would need a wholesaler, or a rural station that already carries it.
White House spokesperson Taylor Rogers said the president wants prices to fall and is taking "historic measures" to relieve supply disruptions.
Other options on the table
Some politicians have floated banning diesel exports to keep more fuel at home. Refiners pushed back, and Jacques Rousseau of Clearview Energy Partners said a ban could backfire: once storage fills, refineries would have to cut production of everything they make.
For farm families already juggling high input costs and tariffs on their exports, the order offers some relief at harvest time. Whether it moves the needle for long-haul truckers and the broader economy, analysts say, depends on how quickly suppliers can get the fuel where drivers need it.