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Trump plans to ease limits on tax-exempt dyed diesel
Fuel that is usually used for off-road purposes is exempt from the federal excise tax
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A vehicle is refueled with diesel at a G&M gas station in Torrance, Calif. (Caroline Brehman/Bloomberg)
Key Takeaways:
- The Trump administration is expected to announce Oct. 5 a plan easing restrictions on tax-exempt dyed diesel to help lower fuel costs before November elections.
- Wider use of dyed diesel could cut prices by avoiding a 24-cent-per-gallon federal tax as diesel averages $6.32 per gallon nationwide.
- The move follows a G7 agreement to release up to 100 million barrels of emergency stocks while Trump continues resisting calls to ban diesel exports.
President Donald Trump is preparing to ease limits restricting the use of a tax-exempt variety of diesel, his latest bid to pare costs for the essential fuel ahead of the November midterm elections.
The Trump administration is expected to unveil the plan targeting so-called red dyed diesel on Oct. 5, according to people familiar with the matter, who asked not to be named before a public announcement.
READ MORE: Texas allows wider use of dyed diesel
Full details of the move were not immediately available. The Trump administration plan effectively would allow more widespread use of red or dyed diesel, which is generally available for off-road purposes, such as in farm equipment.
Because red diesel is exempt from the federal excise tax of 24 cents per gallon, any move effectively enabling its use in on-road vehicles without penalties is expected to translate into an effective tax break. While the move wouldn’t directly lower operational costs for harvesters, tractors and other farm equipment that already runs on tax-exempt red diesel, it is seen cutting the expense to run pickup trucks and other on-road vehicles.
The administration’s approach marks yet another effort to slash costs for diesel that have surged amid wars in Russia and the Middle East that pared refining capacity and reduced the shipment of petroleum products globally. In the U.S., retail prices for diesel averaged $6.32 per gallon on Oct. 4, according to auto club AAA.
Diesel prices are coming down, but we have more work to do. @POTUS is taking action to deliver short-term relief for farmers and ranchers, including prioritizing diesel in the release of 100 million barrels of crude oil. Diesel prices have already dropped about 15 cents per gallon over the last few days. Alabama, Arkansas, Louisiana, Missouri, Nebraska, North Carolina, North Dakota, Oklahoma, Indiana, and Texas are also taking action to help lower diesel costs. I’m headed to Iowa today to talk directly with farmers and ranchers about what we’re doing to make sure they can continue to feed and fuel America and the world. President Trump is focused on long-term energy independence and building the infrastructure needed to make sure this does not happen again. 🇺🇸💪
— Secretary Brooke Rollins (@SecRollins) October 5, 2026
Even though that’s down from an all-time high of $6.53 set last month, farmers, truckers and other users are still paying more than 1.5 times what they were on Feb. 28, when the U.S. and Israel launched attacks on Iran and the fuel cost just $3.76 a gallon.
While the planned move is designed to pare costs for some users, it isn’t expected to boost the overall supply of diesel, a chief Trump administration objective. Globally, diesel stocks are exceptionally tight, driving higher prices.
Supplies of red diesel, which is chemically identical to on-road diesel save for the added dye, come from broader U.S. diesel fuel stockpiles. Domestic diesel supplies currently sit at their lowest-ever seasonal levels as demand picks up into the fall.
Because diesel serves as a workhorse fuel — powering farm equipment, propelling shipping and supplying power to rural communities — the higher prices have rippled through the economy, boosting costs for an array of consumer goods.
That’s caused economic hardship and frustration in America’s heartland, where farmers are being hit with high fuel costs during the fall harvest season. Trump is set to visit Grand Island, Neb., on Oct. 5, part of a bid to bolster the re-election prospects of Sen. Pete Ricketts (R-Neb.) and help drive GOP supporters, including many farmers and ranchers, to the polls in November.
The planned action comes on top of an Oct. 2 agreement by Group of Seven nations and their partners to release as much as 100 million barrels of emergency oil and diesel stocks. The decision followed an intense pressure campaign by the Trump administration aimed at persuading European and other nations to tap emergency diesel stockpiles.
“Diesel prices are coming down, but we have more work to do,” Agriculture Secretary Brooke Rollins said in a social media post on Oct. 5. Trump “is taking action to deliver short-term relief for farmers and ranchers, including prioritizing diesel in the release of 100 million barrels of crude oil. Diesel prices have already dropped about 15 cents per gallon over the last few days.”
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Separately, Rollins told Fox Business that Trump would likely make an announcement on relief for farmers later on Oct. 5. Rollins didn’t elaborate but stressed the administration’s focus on lowering diesel costs.
Farm-state lawmakers had been pressuring Trump to ban U.S. diesel exports in a bid to provide at least short-term price relief. But following the G7 decision Oct. 2, Trump said he wouldn’t restrict foreign sales of the fuel.
