Trump allows tax-free 'red diesel' for road transport, but it won't solve the US diesel supply shortage.

October 7 — U.S. President Trump signed an executive order on Monday this week to temporarily allow tax-exempt "red-dyed diesel," originally used for non-highway purposes such as agriculture and mining, to enter the highway transportation market, in an attempt to ease logistics cost pressures by reducing the fuel tax burden on truck transportation.

Ordinary U.S. highway diesel currently requires a federal excise tax of 24.3 cents per gallon, while red-dyed diesel usually enjoys tax-exempt treatment. In theory, if the policy is smoothly transmitted to end users, the cost of diesel per gallon could be reduced by up to about 24.4 cents. However, the measure does not increase diesel production; it only changes the tax and usage rules for the fuel.

U.S. diesel supply is still facing multiple pressures. U.S. refinery utilization is at a high level, Russia has restricted exports of refined products, and refined product supply in the Middle East has been disrupted, causing diesel prices to remain high. Data from the American Automobile Association show that the average U.S. highway diesel retail price rose to a record high of $6.528 per gallon on September 22, and was still about $6.315 on Tuesday this week.

At the same time, red-dyed diesel is mainly supplied through dedicated agricultural and industrial/mining channels, and highway truck stops generally lack the corresponding storage and refueling facilities. Industry institutions have also warned that if a large number of trucks turn to rural channels to purchase red-dyed diesel, it could squeeze fuel supplies for agricultural machinery during the peak autumn harvest season in North America.

Energy analysts pointed out that expanding the scope of use of tax-exempt diesel cannot change diesel wholesale prices or refinery capacity, and can at most reduce the tax burden for some end users; the real bottleneck in the U.S. diesel market remains insufficient supply.