Red Diesel Move Sows Confusion for Truck Stops, Fuel Sellers

US President Donald Trump’s order allowing truckers to burn diesel normally reserved for tractors and trawlers won’t do much to immediately lower fuel prices, analysts said.

The move announced Monday seeks to ease sky-high pump prices by temporarily allowing tax-free, off-road diesel to be used in 18-wheelers and other highway vehicles.

The off-road version of the fuel is dyed red to set it apart from clear diesel that’s federally taxed at a rate of 24.4 cents a gallon. Trump is trying to tame retail diesel prices that have soared on the backs of wars in the Persian Gulf and Russia, and recently topped $6.50 a gallon.

The Republican president’s executive order also comes less than a month before crucial midterm elections that may imperil GOP control of Congress. High energy costs and affordability writ large have morphed into major concerns among voters.

The practical barriers to easing the diesel crunch by injecting dyed supplies include uncertainty about whether tax obligations will be waived or merely postponed. The White House intends for the savings to be permanent, according to people familiar with the situation.

Another issue is that most truck stops across the country don’t stock red diesel and it’s unclear how long and at what cost they could acquire it, according to Bloomberg Economics.

Until the tax implications are sorted out, some fuel distributors aren’t offering red fuel to on-road customers. The Treasury Department didn’t immediately respond to a request for comment.

“We can’t do anything,” said Kate Childs, president of Tuxis Ohr’s Fuel, a wholesaler in Connecticut. “We have had customers call already. We’ve said we’re waiting for clarity.”

One East Coast filling station and truck stop chain is holding off on distributing red diesel until there’s further clarity on the tax regime, according to a person familiar with the company’s decision making who isn’t authorized to discuss company business publicly.

A White House official emphasized the Treasury Department’s well-established enforcement discretion, and said any liability for deferred taxes would only be enforced by the Internal Revenue Service at the direction of Trump and Treasury Secretary Scott Bessent. Although Congress has tasked the IRS with enforcing America’s tax laws, it’s up to the IRS to determine the best way to do that, the official said.

The IRS also has limited resources to dedicate to enforcement actions via tank inspections and fuel sampling inspections, the official added.

The White House is attempting to assure industry players that the savings will not be clawed back, according to a people familiar with the situation.

The National Association of Truck Stop Owners and the Energy Marketers of America have both advised member organizations that there’s no guarantee of the tax burden being waived.

“Although it won’t be collected from the customer, the fuel tax would still be an obligation of the retailer,” said Tiffany Wlazlowski Neuman, vice president of public affairs at NATSO. “Congress may or may not waive that obligation considering the current needs of the Highway Trust Fund. It’s a lot of risk to absorb that 24 cents per gallon.”

The EMA urged members to “proceed with caution” because the Treasury Department has yet to issue guidance on the how Trump’s order will play out.

There’s also the question of state-level policies that bar the use of off-road diesel on the highways, and whether governors will issue waivers.

It’s not uncommon for rapid policy pivots in Washington, especially those involving taxation, to be met initially with confusion as stakeholder industries press government officials for clarity.

“President Trump’s executive action will quickly cut diesel costs by authorizing highway use of tax-free dyed diesel and deferring the federal diesel excise tax through the end of the year,” said White House spokesperson Taylor Rogers. “This will put money directly back into the pockets of American truckers, farmers, and workers—providing savings of as much as $100 per fill.”

One possible route for adoption of red diesel might lie with large consumers, like major trucking companies, which can buy fuel and dye it themselves.

Red diesel accounts for roughly one-third of US consumption of the fuel, according to Bloomberg Economics. Permitting its use on highways probably won’t have much impact on pump prices, analysts said.

“The impact is probably going to be limited,” said Benjamin Salisbury, director of research at Height Capital Markets. “Every three years we go through the same exercise and come to the conclusion that presidents don’t control fuel prices.”

The Owner-Operator Independent Drivers Association also expects the move to offer minimal relief, said Todd Spencer, CEO of the group.

“It’s not intuitively obvious to me that this would be an easy decision for a trucking company,” said Randy Mullett, principal at Mullett Strategies and a former trucking executive with 40 years of experience in the industry. “If this executive order is you gotta pay it back it’s almost like saying take a loan now that you don’t potentially need.”