KEY POINTS
- The White House is considering letting more buyers use red-dyed diesel, which avoids the federal tax of 24.4 cents a gallon.
- The plan is one of the leading alternatives to a diesel export ban, which the oil industry opposes.
- Analysts say the change wouldn’t add supply, so it may do little to bring down prices above $6 a gallon.
The White House is considering letting more buyers use red-dyed diesel, a fuel that skips most federal taxes, as it looks for ways to bring down diesel prices that have climbed above $6 a gallon. Reuters reported the plan Monday, citing two people familiar with the talks.
The idea came out of days of internal debate and is now one of the leading alternatives to a diesel export ban. President Donald Trump has said he supports a ban, but the oil industry and much of the business community have pushed back hard.
Trump told a Fox News reporter Sunday at the Presidents Cup golf tournament in Illinois that he was considering an export ban “very seriously,” though he acknowledged it could push gasoline prices up a bit. “We may do it,” he said. A White House official said no final decision has been made and the president is weighing every option.
How the Red-Dyed Diesel Plan Would Work
Red-dyed diesel is normally limited to off-road uses such as farming. It’s exempt from the 24.4-cent-a-gallon federal tax on highway diesel and carries only a 0.1-cent charge that funds a cleanup program for leaking underground storage tanks. Selling it more widely could cut the tax on eligible purchases. How much of that reaches buyers would depend on how the relief is set up and whether fuel sellers pass the savings along.
The administration is also asking major refiners to cut diesel exports on their own. Energy Secretary Chris Wright has contacted executives at several companies to see whether they would agree.
The pressure is building. November’s midterm elections are getting close, and voters remain uneasy about Trump’s handling of the economy.While farmers heading into harvest are paying heavily for fuel. Rep. Ashley Hinson, an Iowa Republican running for the Senate, wants the House to return early to pause diesel exports and suspend the federal gas tax.
Analysts Doubt It Will Lower Prices
Some analysts doubt the plan will do much. Patrick De Haan, head of petroleum analysis at GasBuddy, noted that farmers already buy untaxed dyed diesel. Letting truckers use it would save them the tax, he said, but wouldn’t add any supply. “I can’t think that this would have any impact at all,” De Haan said.
Several states have already acted. Texas issued a statewide disaster declaration Monday that expands dyed diesel use and loosens weight limits on fuel, farm and timber loads. Alabama, Louisiana and Nebraska have taken temporary steps of their own.
The American Petroleum Institute, the nation’s largest oil trade group, further said it welcomes a range of options, including dyed diesel waivers.
