Trump Order Allows Tax-Free Red Diesel on Highways to Cut Costs

President Donald Trump signed an executive order Monday allowing tax-exempt red-dyed diesel to be used on public highways and deferring the 24.4-cent-per-gallon federal excise tax through December 31. The move targets near-record diesel prices that have surged since the U.S. attacked Iran months ago.

Red-dyed diesel is chemically identical to regular diesel but untaxed and dyed red for off-road uses like farm tractors and construction equipment. The White House says the order directs the Treasury Secretary to defer payment without interest and explore eliminating the deferred tax entirely.

“In the context of diesel prices that are over two dollars more than they were last year, it just doesn't come close to closing that wound.”

Diesel prices jumped from $3.76 per gallon before the Iran conflict to a record $6.53 on September 22, according to AAA. The national average stood at $6.30 on Wednesday, over 70% higher than a year ago.

Industry groups and analysts say practical hurdles will limit relief. Red dye fuel is a specialty product rarely found at urban truck stops, and most interstate fleets face record-keeping burdens that outweigh the savings until Treasury and states issue clear guidance.

The Owner-Operator Independent Drivers Association called the relief minimal, emphasizing market stability is needed for long-term cost reduction. Farmers who have already finished harvest may see little benefit, though those hauling their own goods on public roads could gain more if states also waive their own diesel taxes.