USA06 October, 20263 min read
Trump Signs Executive Order Expanding Tax-Free Red-Dyed Diesel on Highways Through 2026
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Trump signed a temporary executive order allowing red-dyed diesel for highway use through year-end. The policy lets truckers and farmers use untaxed dyed diesel to cut fuel costs.
Trump expands dyed diesel
President Trump signed an executive order to temporarily allow the use of red-dyed diesel on highways, saying it would “officially waive the off-road requirement and allow anyone to purchase tax-free red-dye diesel for any reason.” The executive order defers the federal excise tax for the remainder of 2026 and directs the Treasury secretary to explore ways to eliminate the requirement to pay the taxes. GasBuddy petroleum expert Patrick De Haan told CBS News, “It might lead to savings for some, but there are a lot of details that will prevent this from having widespread relief.”
The White House said the move is aimed at lowering costs for truckers and farmers as diesel prices remain near record highs, with the national average for a gallon of diesel at $6.32 on Tuesday, according to AAA. NPR said the order expands access to dyed diesel through the end of the year and that the IRS “won't penalize anyone who uses it.”
Savings, penalties, and access
NPR said red-dyed diesel is diesel with red dye in it and that it is exempt from the federal tax of 24.4 cents a gallon on commercial diesel.
Drivers aren't supposed to use it in vehicles that drive on highways and people who do are subject to an IRS penalty of either $1,000 or $10 per gallon, whichever is more expensive.
S&P Global Energy analyst Will O'Neill told NPR, “Red-dyed diesel is diesel with red dye in it. That's it,” and he also called highway use “effectively a form of tax evasion.”
Dow Jones Energy executive director Jaime Brito told NPR, “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?”
The White House fact sheet projected drivers who rely on diesel could save more than $100 each time they fill up, while De Haan warned that state bans could create a “convoluted patchwork” of enforcement.
Supply constraints and next steps
Experts were skeptical the executive order could deliver sweeping savings because it does not address the lack of diesel supply, with Tom Kloza telling CBS News, “This move doesn't increase or decrease that level.” Diesel prices rose as fewer ships got through the Strait of Hormuz and transporting crude to refineries worldwide, and Ukraine’s attacks on Russian refineries took many offline while Russia cut back on diesel exports. CNBC said the White House cited tight global supply tied to the war in Ukraine and a lack of refining capacity as reasons for the move, and it reported that the Group of Seven agreed to release 100 million barrels of diesel and crude reserves.
Average diesel prices hit $6.32 a gallon on Monday, up from $3.76 a gallon before the U.S. and Israel’s war against Iran began, and diesel has risen 77% this year. Fox Business said the order directs the Transportation Department to coordinate with states, industry leaders and labor organizations, while the Agriculture Department is tasked with ensuring farmers have supplies in high-demand areas.