With diesel prices near record levels, the Trump administration is looking at ways to cut costs at the pump. One option under consideration is broader sales of red-dyed diesel, a tax-exempt fuel normally reserved for off-road use. Bloomberg's report, republished by CPA Practice Advisor, says officials have floated a range of measures, from suspending diesel taxes to easing limits on red diesel. The options remain under review and nothing has been finalized.

How High Are Diesel Prices?

  • National average: a record $6.53 a gallon on September 22, according to Carscoops. Prices have since steadied around $6.50, near record levels.
  • California: an average of about $8.40 a gallon.
  • Wider impact: diesel powers trucking and farming, so higher costs feed into the price of many goods.

What Is Red-Dyed Diesel?

Red-dyed diesel is chemically the same as the diesel sold at highway pumps. The red dye marks fuel on which highway taxes have not been paid. It is legal for farm equipment and other off-road uses. Using it on public roads is illegal and can bring heavy fines because it counts as tax evasion.

The federal tax on highway diesel is about 24.3 cents a gallon, plus a 0.1-cent fee for underground storage tanks. Red diesel is exempt from the 24.3-cent tax but still carries the 0.1-cent fee. State taxes add an average of roughly 36 cents more, per the Energy Information Administration. Allowing wider sales would work like a limited diesel tax holiday.

Will It Actually Lower Prices?

Experts are skeptical. Rystad Energy analyst Preben Sorli said broader access could help eligible users but would not change the underlying wholesale price. Refiners would still get the market rate, and the main effect would be lower federal tax revenue. GasBuddy's Patrick De Haan noted that farmers already use red diesel, so they would likely save little.

Export Ban Talk and State Action

  • Trump has voiced support for curbing US diesel exports. His advisers are studying a possible short-term ban, which has moved fuel futures and drawn fierce industry opposition.
  • Republican governors in key farm states have waived some diesel restrictions as harvest season continues.

The Political Backdrop

The administration faces pressure to bring down fuel costs ahead of the November midterm elections. Prices are also elevated by global supply disruptions, with Brent crude above $100 a barrel amid the Middle East war.