Trump issues executive order allowing dyed diesel on highways through end of year

President Trump issued an executive order this week aimed at lowering costs for frequent diesel users by making dyed diesel more accessible through the end of the year, NPR reported on 7 October. The order says dyed diesel will be allowed on highways through the end of the year, and the IRS will not penalize anyone who uses it. According to the order, the move would put money directly into workers' pockets "to support their vital service to our Nation."

Red-dyed diesel is diesel with red dye in it, said Will O'Neill, principal analyst at S&P Global Energy. Chemically, it is almost identical to the diesel sold at most gas stations. It is used and taxed differently: it is meant for off-road vehicles, mainly farm and construction equipment, and is exempt from the federal tax of 24.4 cents a gallon on commercial diesel.

Drivers are not supposed to use dyed diesel in vehicles that drive on highways. Those who do have faced an IRS penalty of $1,000 or $10 per gallon, whichever is more expensive, NPR reported. O'Neill said using red-dyed diesel is "effectively a form of tax evasion."

A handful of states have said drivers can use red-dyed diesel on their highways, according to NPR. State diesel taxes run about 35 cents a gallon on average. Skipping both federal and state taxes could save drivers about 60 cents a gallon, NPR reported.

Diesel prices have risen this year. The U.S. average hit a record $6.52 a gallon a few weeks ago and has eased a bit since, but it remains about $2.60 higher than this time last year, according to AAA. NPR reported that fewer ships have been getting through the Strait of Hormuz to transport crude to refineries, that Ukraine's attacks on Russian refineries have taken many of them offline, and that Russia and China have cut back on diesel exports.

Diesel powers much of the industrial supply chain, from agricultural equipment to trucks moving goods from warehouses to grocery stores. NPR reported that less than a month before the midterms, the price of fuel is becoming a powerful election issue. NPR also reported that analysts say inflation is likely to follow when diesel prices rise.