Trump temporarily expands use of red-dyed diesel. Will it lower costs?
President Trump's new executive order allowing the use of red-dyed diesel on highways is aimed at lowering costs for truckers and farmers grappling with diesel prices that remain near record highs. But experts say they are skeptical that the order could deliver sweeping savings.
"It might lead to savings for some, but there are a lot of details that will prevent this from having widespread relief," Patrick De Haan, a petroleum expert at GasBuddy, told CBS News.
Mr. Trump announced the executive order on Tuesday during a midterm rally in Nebraska, saying the move will "officially waive the off-road requirement and allow anyone to purchase tax-free red-dye diesel for any reason." Red-dyed diesel is exempt from the federal tax of 24.4 cents a gallon that applies to regular diesel used to fuel trucks and other on-road vehicles.
The EO comes as diesel prices remain high, although they've eased slightly after reaching a record high last month of $6.53 a gallon. High diesel prices are placing financial strains on the nation's transportation, construction and agricultural industries, which rely heavily on the fuel to move goods.
On Tuesday, the national average for a gallon of diesel stood at $6.32, according to AAA, compared to $3.76 before the war in Iran started.
The White House didn't immediately respond to a request for comment.
Read on to learn more about red-dyed diesel.
What is red-dyed diesel?
Red-dyed diesel is tax-free diesel intended for off-road vehicles, including farm and construction equipment.
The fuel is dyed red because it allows state law enforcement to easily spot it if drivers are using it on roads and highways in an effort to skirt taxes. Violators may face large fines or penalties, including tax evasion.
Mr. Trump's executive order temporarily removes the limits on red-dyed diesel, allowing all drivers to use it without incurring taxes or penalties. However, it doesn't entirely eliminate taxes on red-dyed diesel.
Instead, it 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, according to the White House. That means drivers could potentially be on the hook for a payment down the road, experts said.
"Whether anyone who makes the switch to dyed diesel suddenly gets a tax bill is the most unanswered question I have," De Haan said in a post on X.
Will the Trump administration's EO lead to cost savings?
According to a White House fact sheet on the executive order, drivers who rely on diesel could save more than $100 each time they fill up.
However, many states also have bans on using red-dyed diesel on roads and highways. The White House said it is working with states to encourage them to also waive the ban.
But if some states don't waive their bans, it could lead to a "convoluted patchwork" of enforcement, which may ultimately deter trucks that need to cross state lines from using red-dyed diesel, De Haan added.
"If one state is enforcing red-dyed diesel and a trucker crosses over with dyed diesel, that could spell trouble, and [lead to] enforcement issues," he said. "Most of the large end users that could stand to benefit from lower prices probably won't get much of the benefit behind this."
The impact on farmers will also be muted, given that they already get tax-free diesel in most states, De Haan noted.
"Most of them have thousands of liters that they've been buying at tax-free, at scheduled intervals, I should say, and so it's not really any huge advantage," he told CBS News.
The EO will allow farmers to use red-dyed diesel in personal vehicles, but it will yield only minimal savings, he added. "I don't think that any farmer is going to be jumping for joy at the prospect of saving, you know, 50 or 60 cents a gallon on their personal vehicle."
Fails to address the supply issue
Experts noted that the EO doesn't address the lack of diesel supply, the key issue keeping prices elevated.
"The U.S. has about 105 million barrels of diesel in inventory," Tom Kloza, chief energy adviser for Gulf Oil, told CBS News in an email. "This move doesn't increase or decrease that level."
In theory, the EO should still put downward pressure on diesel prices; however, swings in the diesel market could blunt progress toward lower prices, Kloza added.
Lowering prices without increasing supply could also stimulate demand, which could have the unintended consequence of driving up costs, De Haan pointed out.
"Part of the reason why we have these high prices is because economics is telling us that there are imbalances," he said. "So to ignore them and go ahead with this risks exacerbating the issue."
Edited by Aimee Picchi
In:
KioskNews shows a cleaned-up reading view extracted from the publisher’s page — the original always lives on their site, not ours.