Trump allows cheaper, dyed diesel on highways to blunt historic fuel-cost spike ahead of midterms

• U.S. diesel prices hit a record $6 per gallon in September, with Americans spending $700 million more per day on gas and diesel compared to a year earlier
• Red-dyed diesel is normally tax-exempt for off-road use only; using it on highways was previously illegal and subject to tax evasion fines
• The Treasury Department is directed to defer the 24.4 cent-per-gallon federal excise tax through end of 2026 and explore eliminating the deferred tax obligation entirely

Summary

Key Development:

President Trump signed an executive order allowing the temporary use of red-dyed diesel—typically reserved for off-road farm and construction equipment—on public highways to address record-high fuel costs. The measure runs through the end of 2026.

Critical Facts & Figures:

• U.S. diesel prices topped $6 per gallon in September for the first time in history
• Red-dyed diesel is exempt from the 24.4 cent-per-gallon federal highway fuel tax
• Americans are spending approximately $700 million more per day on gas and diesel compared to the previous year
• The order defers federal excise tax collection on highway diesel through end of 2026, with Treasury exploring options to eliminate these deferred obligations entirely

Market Context:

The administration attributes elevated diesel prices to tight global supply stemming from the Ukraine war and insufficient refining capacity. These fuel cost increases have rippled through transportation costs nationwide, affecting household expenses broadly.

Regulatory Changes:

Previously, using dyed diesel on public roads was illegal and could result in tax evasion fines. Several states had already relaxed restrictions this year to provide consumer relief. The new federal order expands access nationwide for truckers and farmers.

Additional Actions:

The Treasury Department, in consultation with the Department of War, will defer tax collection without interest or penalties. The Group of Seven nations also coordinated releases of diesel and crude reserves following pressure from Trump, who had considered banning U.S. fuel exports.

Timing:

The executive order was signed Monday evening with measures extending through year-end 2026, notably ahead of midterm elections.