Trump opens red-dyed diesel to all buyers as fuel costs remain high

By reducing the tax burden for certain consumers without increasing supply, the waiver is expected to have a limited impact on diesel futures and crack spreads. If extra purchasing is spurred, broader use of dyed fuel might alter demand patterns across distribution channels and put additional stress on inventories that are already low. The main factors influencing distillate prices continue to be Middle Eastern crude supply, emergency stock draws, and potential US export restrictions—a threat that would affect global diesel markets most severely. The move, according to oil traders, reflects political pressure on fuel costs before the elections, increasing the likelihood of more intervention.

---

Every driver now has access to red-diesel, but with prices above $6 a gallon, the tax saving is negligible in a very costly market.

Summary:

• An order signed by Trump removes the off-road restriction for tax-exempt red-dyed diesel, opening it to all purchasers.
• Red-dyed diesel has the same chemical makeup as regular diesel but is not subject to the federal highway tax of about 24 cents per gallon.
• At roughly $6.30 a gallon, the US diesel average is down from last month's peak but still above the approximately $3.80 seen in late February.
• According to analysts, the saving is small because the tax represents roughly 4% of the pump price and wholesale costs have not changed.
• Diesel stockpiles are at historic lows, and the G7 has committed to releasing as much as 100 million barrels from emergency reserves.

President Donald Trump signed an order that lifts the off-road restriction on red-dyed diesel, enabling all buyers to purchase the tax-exempt fuel as part of an effort to reduce record-level diesel expenses for farmers, truckers and other consumers.

Chemically identical to ordinary diesel, red-dyed diesel escapes the federal highway fuel tax of roughly 24 cents per gallon. Until now, its use was limited to off-road equipment like farm machinery and construction gear, with the dye enabling authorities to spot improper use on roads. By removing that constraint, on-road vehicles such as pickup trucks and commercial fleets can now bypass the federal tax.

This action comes after diesel prices jumped due to supply disruptions in the Middle East. As of Saturday, the US nationwide average was about $6.30 a gallon, lower than the record near $6.50 last month but significantly higher than the roughly $3.80 recorded at the end of February before tensions with Iran flared. Agriculture Secretary Brooke Rollins noted that prices are coming down but further steps are required, highlighting help for farmers and ranchers in the fall harvest.

The financial benefit is expected to be limited. The federal tax makes up barely 4% of the current pump cost, and analysts point out that wider availability of dyed diesel leaves the wholesale price unchanged. States set their own fuel taxes, averaging about 35 cents a gallon, and how these will be applied remains uncertain.

Supply is the more serious limitation. US diesel stockpiles are at record lows for this period, and worldwide inventories are extremely constrained. Last week the Group of Seven agreed to release as much as 100 million barrels from emergency oil and diesel reserves, while Trump has resisted calls from farm states to ban diesel exports.

More specifics on the waiver's scope, duration and enforcement are anticipated.