President Donald Trump’s executive order allowing off-road diesel on America’s highways spares truckers from federal penalties for using fuel that normally avoids excise taxes, but industry analysts say the practical relief is limited. Off-road diesel, dyed red to distinguish it from taxed on-road fuel, is exempt from federal and state excise taxes because it is typically used in construction, farming, railways and home heating. The federal government charges a 24.4-cents-per-gallon excise tax on on-road diesel. Trump’s order waives federal penalties for using red-dyed fuel on highways, but it only defers the actual tax payment until the end of the year, leaving the Treasury Secretary to explore ways to eliminate the deferred obligation. “While it might be deferred, it may not disappear entirely,” said Andy Lipow, president of Lipow Oil Associates. “Maybe you save a little bit of money up front, but you might have to pay it to the government later.” Crucially, the president cannot defer state excise taxes, which at a national average of 35.5 cents per gallon can be higher than the federal levy. Some states have taken independent action to provide diesel relief, but others could enforce local laws prohibiting red-dyed fuel on highways. “It’s not like every state trooper is going to pull over the truck and look at your diesel fuel, but you’re a trucker — do you need that aggravation?” Lipow said.
The order comes as Trump faces political pressure ahead of midterm elections on Nov. 3, with Republicans defending competitive races in farm states such as Iowa. Retail diesel prices hit a record high in September and currently average $6.30 a gallon nationally, according to AAA. The president last month considered a diesel export ban but abandoned the idea, telling reporters last Friday that “it was never really on the table.” The oil industry and big business groups had strongly opposed the export ban. The limited scope of the executive order underscores the constraints on White House action to address surging fuel costs without congressional approval.