Trump Issues New Executive Order to Cut Diesel Prices

October 7, Washington – US President Donald Trump has introduced a new provision to grant tax exemptions on ‘red-dyed diesel’ for vehicles, aiming to control rising diesel prices. Trump signed the executive order on Monday night, permitting the temporary use of tax-exempt red diesel, typically reserved for off-road use, in vehicles operating on highways. Although the fuel quality of red diesel and regular diesel in the US is equivalent, red diesel does not incur the federal fuel tax. This diesel is primarily used in tractors, construction equipment, and other off-road purposes. During a campaign event in Nebraska, Trump stated that this decision would provide economic relief to truck drivers, farmers, and everyday consumers. He further claimed that expanding the use of tax-exempt diesel would reduce transportation costs for commodities, including food.

In the United States, diesel fuel used on roads is subject to a federal tax of 24.4 cents per gallon, with an additional state tax averaging 35.5 cents per gallon according to federal data. Diesel prices have surged significantly recently. Prior to the Iran war, diesel fuel was priced at $3.76 per gallon, but by September 22, it had risen to $6.53 per gallon. On Monday, the national average was $6.32 per gallon. Refueling an 18-wheeler truck with 250 gallons of diesel could cost around $1,575. Using tax-exempt diesel could save about $150. Previously, 10 states including Texas, Oklahoma, and Alabama took measures to facilitate the use of tax-exempt diesel for highway vehicles. This step, effective from September 23 to October 2, covers approximately one-third of total diesel sales in the US within these states.

However, fuel market analysts argue that Trump’s decision does not address the fundamental issues behind diesel price hikes. Patrick De Haan, petroleum analyst at GasBuddy, pointed out that implementation is complex. Since trucks traverse multiple states, varying state regulations make expanding access to tax-exempt diesel difficult. “This is not a long-term solution to recurring problems,” De Haan said, “but it might offer politicians an opportunity to show some progress.” Diesel prices have increased by about 77 percent this year. Although prices recently dropped by about 20 cents, this remains the largest annual increase since the AAA began keeping records in 2000. Analysts attribute the diesel price surge primarily to global refinery shortages rather than taxes. Refinery damages owing to conflicts in the Middle East and Russia, along with reduced exports from China to prevent domestic fuel scarcity, have limited supply. US refineries are striving to meet global demand but are operating near capacity and cannot immediately boost production. Andy Lipow, president of Lipow Oil Associates, said tax relief would provide short-term consumer benefit but would not fully resolve the fuel shortage.

Meanwhile, Ukraine has signaled an intensification of attacks on Russian oil refineries. Ukrainian President Volodymyr Zelensky pledged continued strikes on Russia’s oil processing infrastructure, potentially adding further pressure on global supplies of diesel and other petroleum products. Trump has expressed optimism that diesel prices will soon decline. The duration of the executive order remains unclear, but he hopes additional measures will not be necessary for an extended period.