U.S. President Donald Trump has signed an executive order temporarily expanding access to tax-exempt red-dyed diesel, in a move aimed at easing the impact of soaring fuel costs on American truckers, farmers and other diesel users.
Trump signed the order on October 5 during a rally in Grand Island, Nebraska, saying the measure would waive the traditional off-road requirement and allow people to purchase red-dyed diesel for highway use.
Red-Dyed Diesel Can Be Used on Highways Temporarily
Red-dyed diesel is chemically similar to regular diesel but is dyed red to distinguish it from fuel subject to highway taxes. It has traditionally been used for purposes such as farming, construction and other off-road activities.
Under the new order, the Treasury Department is directed to determine whether it can defer federal excise tax payments on dyed diesel used on roads from October 5 through December 31, 2026. The order also directs the IRS not to impose certain penalties on highway use of the fuel during that period, subject to the applicable legal authority and implementation guidance.
The White House has described the move as temporary relief for Americans dealing with high diesel prices.
Federal Diesel Tax Is 24.4 Cents a Gallon
The federal excise tax on highway diesel is 24.4 cents per gallon. The White House said that amounts to roughly $60 on a 250-gallon fill, with greater savings possible in states that adopt matching measures.
However, the federal action does not automatically eliminate every fuel tax. State governments will determine whether to introduce similar measures, and the executive order specifically calls for federal officials to encourage states to coordinate with the policy.
Diesel Prices Have Hit Record Levels
The announcement comes as U.S. diesel prices have climbed sharply.
Reuters reported that diesel reached a record of about $6.50 a gallon last month. The increase has been linked to disruptions in global fuel supplies, including the war involving Iran and the ongoing Russia-Ukraine conflict, which have affected refineries and energy flows.
High diesel costs are particularly significant for trucking because the fuel is essential for transporting goods across the country. Farmers and other businesses that depend heavily on diesel are also facing higher operating expenses.
Trump Administration Seeks Wider Fuel Relief
The diesel order is part of a broader effort by the Trump administration to respond to the energy-price shock.
The administration has also considered measures involving diesel exports, while the G7 has agreed to release 100 million barrels of diesel and crude from emergency reserves following pressure from Washington.
Trump said he hoped the new diesel waiver would not be necessary for long, reflecting the administration's expectation that fuel-market pressures could eventually ease.
Agriculture and Transportation Agencies Get New Roles
The executive order directs the Agriculture Department to help ensure farmers can obtain dyed diesel in areas experiencing high demand.
The Transportation Department has also been instructed to coordinate with state governments, industry representatives and labor organizations to support access and maintain safety on the nation's highways.
The White House says the measures are designed to provide relief while keeping transportation and agricultural supply chains functioning during the fuel-price surge.
Questions Remain Over How Much Prices Will Fall
Although the measure could reduce the tax burden for some users, it does not directly increase the amount of diesel available in the market.
Energy analysts have previously warned that wider access to red-dyed diesel may provide only limited savings because it does not solve the underlying supply constraints driving diesel prices higher.
For now, the policy provides a temporary avenue for lower fuel costs, particularly for heavy diesel users. Its overall impact will depend on how quickly federal guidance is implemented, how states respond and whether global fuel supplies begin to recover.
The relief is currently tied to the end of 2026, while the Treasury Department has also been instructed to examine options for potentially eliminating the deferred tax obligation.
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