White House Weighs Dyed Diesel Tax Relief as Pump Prices Bite

The White House is weighing regulatory changes that would allow broader sales of red-dyed diesel, part of a push to bring down record fuel costs, according to people familiar with the discussions.

The proposal has surfaced as a leading alternative to a diesel export ban, which President Donald Trump has said he is considering "very seriously." An export ban has drawn broad opposition from the oil industry and other business groups.

Under current federal rules, highway diesel carries a tax of 24.4 cents per gallon. Red-dyed diesel, generally reserved for off-road uses such as farming, is exempt from that levy but still subject to a 0.1-cent-per-gallon charge that funds the Leaking Underground Storage Tank Trust Fund. Expanding where the dyed fuel can be sold could reduce the federal tax burden on eligible purchases, though the effect on pump prices would depend on how the relief is structured and how much sellers pass on.

The administration has also sought voluntary commitments from major refiners to limit diesel exports, with Energy Secretary Chris Wright contacting executives at several large refiners to gauge their willingness. A White House official said no final decisions have been made and that the president is weighing all options.

Trump told a Fox News reporter at the Presidents Cup golf tournament in Illinois that a diesel export ban could sometimes lead to a modest rise in gasoline prices, adding that the administration is looking at the idea seriously and may act.

Pressure has grown as the national average diesel price climbed above $6 a gallon, squeezing farmers heading into harvest, truckers and other businesses. Farm Belt lawmakers are urging action. US Representative Ashley Hinson, a Republican running for the Senate in Iowa, has called for the House to return before the midterm elections and for a pause on diesel exports and a suspension of the federal gas tax, alongside a diesel relief program for farmers and truckers.

The debate comes as several states have moved to relax restrictions on dyed diesel. Alabama, Louisiana and Nebraska have each taken temporary steps in recent days to allow broader use of the tax-exempt fuel or suspend state penalties, while Alabama and Louisiana have sought additional relief from the federal government.

Not everyone sees the tax proposal as effective. Patrick De Haan, head of petroleum analysis at GasBuddy, said it would not address the supply imbalances driving up on-road diesel prices. Farmers already use untaxed dyed diesel, he noted, and allowing truckers to use it could save them the federal tax without adding supplies. "I can't think that this would have any impact at all," he said. "It's simply diesel with red dye added that's not taxed. It does nothing to improve supply or impact price."