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Trump has signed an executive order allowing wider access to tax-exempt red-dyed diesel as US fuel prices surge amid disruptions linked to the Iran war, refinery outages and attacks on Russian energy infrastructure
US President Donald Trump has signed an executive order expanding access to tax-exempt diesel, as his administration looks for ways to ease fuel costs that have surged amid the war involving Iran and disruptions to global energy supplies.
Trump signed the order on Tuesday during a rally in Nebraska, saying it would waive the requirement that tax-free red-dyed diesel be used only for off-road purposes.
The move comes after Trump blamed Ukraine and Democrats for the rise in US fuel prices, saying refinery disruptions were now a bigger factor than the Strait of Hormuz in driving gasoline prices higher.
“What’s driving up Gasoline is no longer the Strait of Hormuz,” Trump said in a post on Truth Social, pointing instead to Russian refineries being attacked by Ukraine and refineries being shut down in Democratic-led states such as California.
What Trump’s diesel order does
Red-dyed diesel is diesel fuel that has been chemically dyed to distinguish it from fuel on which highway taxes have been paid.
It is generally used for tax-exempt purposes such as farming, construction and other off-road activities. The fuel itself is not fundamentally different from regular diesel. The red dye is primarily a marker showing that the fuel is intended for a nontaxable use.
Under US federal tax rules, dyed diesel can be sold without the main federal diesel excise tax when it is used for a qualifying nontaxable purpose. The federal excise tax on diesel is 24.4 cents per gallon, according to the Internal Revenue Service.
More from BusinessTrump’s order removes the traditional off-road restriction, allowing people to buy the tax-exempt red-dyed fuel regardless of its intended use, Reuters reported.
That could lower the effective cost of diesel for consumers and businesses that are able to access the fuel under the new rules.
Why diesel prices are a problem
US diesel prices have surged to record levels as international energy markets have been hit by multiple supply disruptions.
Diesel reached about $6.53 per gallon recently. The rise has been linked to disruptions caused by the Iran war, attacks on Russian refineries and declining global diesel inventories.
Diesel is particularly important to the US economy because it is widely used by trucks, farmers, construction companies and other heavy-duty operators.
Higher diesel costs can therefore feed into the price of transporting goods and agricultural products, adding to wider inflationary pressures.
The fuel-price surge also comes at a politically sensitive time for Trump, with US midterm elections scheduled for November 3.
Why Trump is blaming Ukraine and Democrats
Trump has increasingly focused on refinery disruptions as he seeks to explain the rise in US fuel prices.
In his Truth Social post, he pointed to Ukrainian attacks on Russian energy infrastructure and refinery closures in Democratic-led states.
The comments came as the administration faces pressure over the cost of living. Trump has argued that the energy-price shock is being driven by external disruptions rather than by his administration’s policies.
The Strait of Hormuz remains a major factor in global energy markets. The waterway normally handles a significant share of global oil shipments, and its disruption following the Iran conflict has contributed to the rise in energy prices.
