The Trump administration is considering broader use of red-dyed diesel to reduce fuel costs by allowing more buyers to avoid the federal diesel tax, while several states have introduced separate measures to ease gasoline and diesel prices.
The Trump administration is evaluating regulatory changes to lower fuel prices as diesel climbs to historic levels. The federal government is considering broader use of red-dyed diesel, which would allow more buyers to bypass the federal fuel tax on that fuel type.
Currently, highway diesel carries a 24.4-cent-per-gallon tax, while dyed diesel faces only a 0.1-cent-per-gallon charge from the Leaking Underground Storage Tank Trust Fund.
Diesel hit a record USD 6.53 per gallon one week ago, according to AAA data, with national averages climbing above USD 6 per gallon. The price surge stems from global supply disruptions, including the US war on Iran and Ukrainian strikes on Russian refineries, combined with dwindling international fuel reserves. Farm Belt lawmakers are pressing for action as farmers face steep fuel costs during harvest season.
The red-dyed diesel proposal emerged from administration discussions as an alternative to a full export ban on diesel, which President Trump has backed. However, the oil industry and wider business community have opposed an export ban.
Energy Secretary Chris Wright has been in talks with major refiners about voluntary export limits instead. A White House official stated that no final decisions have been made, but the president continues evaluating options.
States act independently to ease fuel costs
Several states have already implemented their own measures. Texas issued a statewide disaster declaration on Monday to expand dyed diesel use and lift weight restrictions on fuel and agricultural loads. Alabama, Louisiana, and Nebraska took similar steps to allow broader use of untaxed diesel or suspend penalties.
Georgia suspended its gasoline and diesel tax for 30 days and removed commercial vehicle weight restrictions. California lifted its seasonal summer-blend gasoline requirement and allowed winter-blend fuel immediately. Massachusetts plans to file legislation suspending its 24-cent-per-gallon tax on gasoline and diesel for two months, requiring retailers to pass savings to consumers.
Other states relaxed environmental rules. Michigan allowed winter-blend gasoline and E15 fuel sales through summer. Texas also suspended low-emission diesel regulations. Kentucky reduced its gasoline tax by 10 cents in May, while Indiana suspended sales tax on gasoline entirely.
Industry sceptics question effectiveness
Patrick De Haan, head of petroleum analysis at GasBuddy, questioned whether red-dyed diesel expansion would meaningfully lower prices. Farmers already use untaxed dyed diesel, he noted, so allowing truckers the same access would mainly shift who pays taxes rather than increase overall supply or reduce prices.
The American Petroleum Institute, however, welcomed consideration of red-dyed diesel waivers as part of a broader effort to lower diesel costs.
