Trump signs diesel order

President Donald Trump signed an executive order on Monday to temporarily allow road vehicles to use red-dyed diesel, which is normally reserved for farm equipment and off-road use.

What is red-dyed diesel

Dyed diesel is essentially the same as regular diesel but exempt from the federal highway tax of twenty-four point three cents per gallon and certain state highway taxes. It is marked with red dye so inspectors can distinguish it from regular diesel.

Why fuel prices are soaring

Average diesel prices in the U.S. hit six dollars and thirty-two cents a gallon on Monday, up from three dollars and seventy-six cents before the U.S. and Israel's war against Iran began on February twenty-eighth. Diesel has risen seventy-seven percent this year.

Multiple factors drive prices up

Iran disrupted shipping through the Strait of Hormuz and attacked Middle Eastern refineries in retaliation for U.S.-Israeli strikes. Ukrainian attacks on Russian refineries and Chinese export restrictions have magnified the spike further.

Trump's claim about the order

Trump said at a campaign rally in Grand Island, Nebraska that the order would officially waive the off-road requirement and allow anyone to purchase tax-free red-dyed diesel for any reason, and would drive down costs of all goods including groceries.

“This order will also drive down the costs of all goods, including groceries.”

What the order directs

The order directs the secretaries of Transportation, Agriculture, Defense, and the Treasury to temporarily allow off-road dyed diesel for highway use and defer the applicable federal excise tax. The waiver lasts through the end of the year.

Limited direct pump savings

Most gas stations do not sell dyed diesel to standard consumers, so direct benefits at the pump may be limited. However, consumers may see indirect savings on groceries and goods through lower supply-chain costs for farmers and truckers.

Savings for truckers and farmers

Waiving federal taxes would save truckers about sixty dollars per fill-up on an eighteen-wheeler with two hundred fifty gallons of diesel. If states waive state taxes too, truckers could save more than one hundred dollars per fill-up.

Ten states already allow it

Alabama, Arkansas, Indiana, Louisiana, Missouri, Nebraska, North Carolina, North Dakota, Oklahoma, and Texas already temporarily permitted dyed diesel use for some on-road use, largely targeting agricultural and timber haulers.

Farm Bureau backs the move

American Farm Bureau President Zippy Duvall said in an October first letter to Trump that a waiver of the federal tax would provide immediate cost relief for farmers, ranchers, and agricultural haulers that continue to rely on taxable clear diesel.

Concerns about supply strain

Some analysts question how much relief the waiver can deliver without addressing underlying diesel supply constraints. Others warn that a large influx of on-road commercial vehicles purchasing dyed diesel could strain inventories and drive up costs for farmers during harvest.

Other measures under consideration

The Trump Administration has pursued other measures including a Group of Seven agreement to release one hundred million barrels of diesel and crude oil reserves over four months, and an extended Jones Act Waiver allowing foreign vessels to transport energy products between U.S. ports.