President Donald Trump signed an executive order on Monday night that temporarily allows all drivers to purchase and use tax-exempt red-dyed diesel on public highways through the end of 2026, a move aimed at easing record-high fuel costs for truckers, farmers, and other consumers.
The order directs the Secretary of the Treasury, in consultation with the Secretary of Defense, to defer the federal excise tax on dyed diesel used for highway purposes without interest or penalties, and to explore pathways to eliminate the obligation entirely.
Diesel prices have surged to historic levels in recent months, driven by global supply disruptions linked to the war involving Iran and Russia, as well as reduced refining capacity.
According to the U.S. Energy Information Administration, the average retail price for on-highway diesel was $6.38 per gallon as of late September, up $2.63 from a year earlier. The national average reached a record $6.53 per gallon on September 22 before retreating slightly.
Trump announced the order during a rally in Grand Island, Nebraska, for Republican Senator Pete Ricketts. Natalie Harp, Trump’s special executive assistant, brought the document to him at the lectern, and he signed it as the crowd cheered.
“I’m going to sign a historical executive order to officially wave the off-road requirement and allow anyone to purchase tax free, red-dyed diesel for any reason,” Trump said at the rally.
The president also acknowledged his unfamiliarity with the fuel, saying, “I don’t know what the hell it is, but whatever it is, it’s supposed to be very good”.
Red-dyed diesel is chemically identical to standard highway diesel but is marked with a red dye to indicate it is intended for off-road uses such as agriculture, construction, and heating. Because these uses are generally exempt from federal highway fuel taxes, the fuel is sold at a lower price.
The federal excise tax on highway diesel is 24.4 cents per gallon, consisting of a 24.3-cent federal diesel tax and a 0.1-cent tax that finances the Leaking Underground Storage Tank Trust Fund. State fuel taxes can add significantly more, with the national average for state diesel taxes at approximately 35.5 cents per gallon.
Under normal rules, using dyed diesel on public roads is illegal and can result in penalties of the greater of $1,000 or $10 per gallon involved, plus applicable back taxes.
The White House estimates the order could save truckers more than $100 per refill. A trucker filling a 250-gallon tank currently pays about $1,575 per fill-up, a cost that could fall by roughly $150 if federal and state taxes are not applied.
The American Farm Bureau Federation had requested the action in an October 1 letter to Trump, citing a sharp increase in farm diesel prices from $3.01 per gallon in September 2025 to $5.61 in September 2026.
Farm Bureau President Zippy Duvall wrote, “Higher diesel expenses are hitting farmers at one of the most fuel-intensive times of the year — harvest. Diesel is essential for the American economy and for farmers. Everything on the farm, from running tractors, combines and irrigation equipment to transporting crops, livestock and inputs requires diesel. Farmers and ranchers cannot postpone harvest or simply stop using diesel when prices rise”.
The order directs the Secretary of Agriculture to ensure farmers’ access to dyed diesel in high-demand areas and encourages states to adopt corresponding relief measures.
Several states had already taken independent action before the federal order. Between September 23 and October 2, ten states including Texas, Oklahoma, and Alabama implemented measures to boost access to dyed diesel for highway use, according to research firm ClearView Energy Partners. These states account for roughly one-third of U.S. diesel sales.
On Tuesday, Illinois Governor JB Pritzker issued a state order directing the Illinois Department of Revenue and Illinois State Police not to impose penalties when dyed diesel from bulk storage is used on highways for agricultural purposes through the end of the year.
However, the Illinois Farm Bureau noted that the state order does not specifically excuse any motor fuel tax liability that may be owed. The organization emphasized that the federal tax is deferred, not waived, and that legislative action would be required to ultimately forgive the deferred federal tax.
“Deferred is not waived,” said Rodney Knittel, Associate Director of Transportation and Infrastructure for the Illinois Farm Bureau. “That doesn’t mean that you are not liable for the tax”.
Industry experts expressed skepticism about the order’s practical impact. Patrick De Haan, head of petroleum analysis at GasBuddy, said, “It’s not really a needle-mover”.
De Haan also cautioned that implementation would face logistical challenges. “Washington is great at making something sound easy that is not. Just because you’re allowing something to happen, doesn’t mean it will,” he said. “This won’t fix the problem overnight, but it can allow politicians to take a bit of a victory lap”.
Tom Seng, assistant professor of energy finance at Texas Christian University, noted that the order does not add any new diesel supply to the market. Instead, it creates new demand for red diesel, which is typically sold by bulk suppliers rather than at standard gas stations.
John Esparza, president and CEO of the Texas Trucking Association, said the savings carry risks. The dye can remain in a truck’s fuel system after the order expires, potentially leading to penalties if inspectors test for dye residue. Esparza said the group is waiting on guidance from the IRS before deciding whether using red diesel is worth the risk for its members.
The White House fact sheet attributed the price surge to the Russia-Ukraine war, restricted global diesel supply, and a lack of refining capacity, and accused Democratic-led states of closing refineries under green energy policies.
Trump has also blamed Ukraine for the diesel shortage, stating last month that he told President Volodymyr Zelensky to stop attacking Russia’s diesel-fuel-producing refineries, saying, “He’s causing a shortage of diesel fuel”.
Congressional Republicans quickly praised the order. Representative Jason Smith of Missouri called it “a much-needed step to lessen the burden that increased fuel prices have had on farmers, ranchers and the entire agricultural community”. Louisiana Governor Jeff Landry described it as “a HUGE WIN”.
The order directs the Treasury Department to determine within five days whether it has the legal authority to defer the taxes and to explore whether congressional action is needed. Without legislation, farmers and truckers could still be liable for taxes deferred between October 5 and December 31, 2026.
