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US · Economy

Trump signs executive order opening tax-free red diesel to highway use, deferring federal diesel tax

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President Trump signed an executive order on October 5 in Grand Island, Nebraska, waiving the off-road-only restriction on tax-exempt dyed diesel and deferring the federal diesel excise tax through year-end, without interest or penalties, to lower fuel costs before the midterms.

Why it matters

US diesel prices hit a record of about $6.50 a gallon last month, one of the toughest pocketbook issues ahead of the November 3 midterm elections. The order opens tax-free "red diesel" to highway vehicles and defers the 24.4-cent-per-gallon federal diesel tax through year-end; the White House estimates about $60 in savings on a 250-gallon fill from the federal tax alone — over $100 where states match the action.

Full report

On Monday, October 5, President Trump signed an executive order from the rally stage in Grand Island, Nebraska, expanding access to tax-exempt dyed diesel: the off-road-only restriction is waived, and anyone may buy red-dye diesel for highway use.

The order directs the Treasury Secretary, in consultation with the Secretary of War, to defer payment of the federal excise tax on on-road use of dyed diesel for the remainder of 2026 without interest or penalties, and to explore pathways — including legislation — to eliminate the deferred obligation. The IRS must announce within 5 days that no penalties will apply for dyed diesel sold for or used on highways from October 5 through December 31, 2026.

The order also directs the Transportation Secretary to coordinate with states, industry and labor on dyed-diesel access, and the Agriculture Secretary to ensure farmers' access in high-demand areas. The White House attributes the price spike to the war on Iran and the Russia-Ukraine conflict hitting refineries, plus tight global refining capacity; AAA put the US average diesel price at $6.32 a gallon on October 4. Last week the G7 announced a release of 100 million barrels of diesel.

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