President Trump’s recent executive order aims to expand the use of tax-exempt red-dye diesel in an effort to alleviate costs for consumers. However, experts suggest that it may not significantly lower gas prices at the pump.
This specific fuel, dyed red to signify its tax-exempt status, shares the same chemical makeup as regular diesel but is primarily intended for off-road vehicles, such as tractors.
Long-haul truckers could potentially save a considerable amount with this cheaper option, which might lead to reduced grocery prices. Yet, numerous hurdles could hinder this benefit.
According to Patrick De Haan, who leads petroleum analysis at GasBuddy, only a small fraction of truckers—if any—will be able to utilize this fuel since it’s not commonly found at fueling stations. He suggests that probably only one out of a hundred truckers might benefit from it.
“One significant issue is that dyed diesel is a niche product. It’s generally available in rural regions where farming is prominent, not at gas stations,” De Haan explained.
While off-road diesel does exist across the country, the stations that offer it are often spread thin and generally located far from urban areas. For instance, the nearest red-dye diesel source to New York City is in North Bergen, New Jersey, and none can be found on Long Island.
“Most consumers aren’t aware that red-dye diesel is just regular ultra-low sulfur diesel with added dye. This makes it harder to encourage adoption,” noted Ramanan Krishnamoorti, a vice president at the University of Houston.
During a rally on Monday evening, Trump signed the executive order, asserting that an average truck driver could save over $100 with each fill-up, and that farmers could potentially save millions. He argued that this tax waiver would significantly lower the price of various goods, including groceries, as most consumer products in the U.S. are transported by diesel-running trucks.
As of Tuesday, the national average price for diesel fuel reached $6.32 per gallon, a sharp increase of 71% from last year’s price of $3.68, according to AAA.
Some states may see a reduction of up to 60 cents per gallon in diesel prices as a result of the executive order, though this will likely vary across different locations.
Krishnamoorti indicated that the effectiveness of this rollout relies on its adoption speed, adding that some states may attempt to assert their own regulations against federal directives.
Executive orders don’t automatically override state laws, so it remains up to state officials to decide whether they want to eliminate taxes on diesel fuel. Furthermore, tax rates for red-dye diesel differ from state to state.
This discrepancy in tax treatment could discourage trucking companies, which often operate across state lines, from purchasing red-dye diesel due to the risk of penalties in states that do not exempt these taxes.
If Congress were to endorse a national diesel tax suspension, it might yield average savings of about 24.4 cents per gallon nationwide, as noted by De Haan, but this suggestion has yet to be presented by lawmakers.
“For truckers who operate within one state, this could be beneficial. Farmers and construction firms already utilize dyed diesel,” De Haan mentioned. “While the announcement has garnered attention, its actual impact may be minimal.”
Moreover, there are concerns regarding the language of the executive order, which permits highway usage of tax-free dyed diesel, stating it will defer the federal diesel excise tax until the year’s end. It remains uncertain whether these taxes will be entirely eliminated or if customers will face future fees once the waiver ends.
Lastly, some drivers might hesitate to use red-dye diesel because it could leave a color residue in their fuel tanks, and once the temporary exemption expires, they could attract unwanted attention from law enforcement if there are visible traces of red emissions.
