What Red-Dyed Diesel Is and Whether It Could Cut Costs

What is red-dyed diesel?

Red-dyed diesel is ordinary diesel fuel marked with red dye so it can be distinguished from fuel sold for use in road vehicles. It is generally intended for off-road uses, including farm and construction equipment. ²

It has ordinarily been tax-exempt and unavailable for on-road vehicles. That tax treatment is part of what makes it relevant to the order: fuel for road use is subject to a federal diesel tax, while qualifying off-road fuel is not. ¹²

Who can use red-dyed diesel on roads under the order?

The executive order temporarily expands access to red-dyed diesel for on-road use. CBS reports that farmers who previously had to use regular, federally taxed diesel in trucks and other road vehicles can now use red-dyed fuel. ¹

Vox says the order was signed on Monday evening and runs through the end of the year. It defers payment of the federal tax for on-road use; it does not itself cancel the tax. The order also directs Cabinet officials to explore ways to eliminate the obligation to pay the deferred taxes. ²

That means the change should not be read as a permanent change to fuel rules or as proof that the tax has been removed. The available reports describe a temporary expansion and tax deferral. ¹²

Will the change lower diesel costs?

It may reduce costs for some people or businesses that can use the fuel under the order, but the sources do not support expecting large, general savings. CBS quoted petroleum expert Patrick De Haan saying the details would limit widespread relief. ¹

A tax deferral is not the same as eliminating a tax. And a lower tax burden for some users does not necessarily mean that the price shown at every pump will fall by the same amount. Vox’s assessment is that the order is unlikely to lower prices very much because it cannot change the underlying global diesel shortage. ²

So the short answer is: the order could offer some limited relief to eligible users, but it is not a broad fix for high diesel prices. ¹²

Why are diesel prices high, and why does it matter?

The reports give a sharply elevated national average price as context. CBS reported an average of $6.32 a gallon on Tuesday and said prices had eased slightly after reaching a reported high of $6.53 the previous month. Vox also gave $6.32 as the current average and compared it with $3.68 a year earlier. ¹²

The publications describe different explanations in the supplied reporting: Vox attributes high prices to the Iran war and a global diesel shortage, while CBS describes prices as remaining high and notes the financial strain on transportation, construction, and agriculture. ¹²

Those industries use diesel to move goods and power equipment, so fuel costs can affect businesses beyond the person filling a vehicle. The sources do not establish how much of any business’s costs, or consumer prices, would change because of this order. ¹

What is still unclear?

The reports do not quantify how much any particular farmer, trucker, or other eligible user might save. They also do not show whether lower fuel costs will be passed on to customers. ¹²

The tax remains deferred, not suspended, under Vox’s description of the order. Whether officials will find a way to eliminate the obligation to pay it, and what happens after the temporary period ends, are not settled in the reporting provided. ²