President Donald Trump's executive order aimed at reducing diesel costs by expanding the use of dyed diesel fuel is unlikely to provide significant relief for farmers and truckers grappling with record-high prices, according to industry representatives and economists. The order, which defers the federal tax of $0.24 per gallon on regular diesel until the end of the year, has drawn skepticism due to its limited scope and the complexities of state-specific regulations.
Dyed diesel, which is identical to regular diesel but contains a red dye to distinguish it for tax enforcement, is already permitted for off-road uses such as agricultural equipment, construction machinery, and heating. The executive order allows this fuel to be used more broadly, but many farmers have already completed their harvests, diminishing the immediate impact.
"In the context of diesel prices that are over two dollars more than they were last year, it just doesn't come close to closing that wound," said Matt Perdue, president of the North Dakota Farmers Union. He noted that while the intention is appreciated, the measure provides little solace as farmers face soaring costs for inputs like fertilizer and seed, exacerbated by refinery constraints and supply disruptions.
Diesel prices have surged more than 70% compared to a year ago, averaging $6.30 per gallon nationwide as of Wednesday, according to AAA. The executive order's tax deferral is temporary, and most states impose their own diesel taxes.
For truckers, navigating the differing state rules surrounding dyed diesel presents a significant challenge. Patrick De Haan, head of petroleum analysis at GasBuddy, stated that the largest diesel users, national carriers, are least likely to use dyed diesel due to the risk of facing fines in states with conflicting regulations. "A national carrier crossing five or six states in a day faces enormous risk with a patchwork of rules, legal in one state, and subject to fines in the next," he wrote.
Todd Spencer, president and CEO of the Owner-Operator Independent Drivers Association, echoed these concerns, estimating that a $1 increase per gallon in fuel costs adds approximately $400 per week for independent truckers. He suggested the savings from the order would be minimal.
Economists also voiced concerns that the order could inadvertently increase competition for dyed diesel, potentially exacerbating the situation for farmers. David Ortega, a professor of agricultural and applied economics at Michigan State University, warned of a potential "rush for dyed diesel" that could strain existing infrastructure. "I think there's a real chance this could backfire and make the situation worse for farmers," he said.
Questions also remain about the infrastructure's capacity to support increased demand for dyed diesel, particularly for larger trucks. Paul Mitchell, a professor of agricultural and applied economics at the University of Wisconsin-Madison, pointed out that not all dyed diesel stations are equipped to serve semi-trucks.
Henry Hanscom, chief advocacy and public affairs officer for the American Trucking Associations, indicated that the organization would review the IRS's implementation guidance for the policy, noting that the order provides temporary penalty relief and potential tax deferral, not outright forgiveness.
Trump had previously considered a diesel export ban, but that measure is now off the table. Meanwhile, G7 countries agreed to release 100 million barrels of oil and fuel products to stabilize markets. However, underlying causes for the global diesel shortage, including geopolitical issues like the conflict in Ukraine and tensions in the Strait of Hormuz, are expected to have a longer-term impact on supply, potentially taking a year or more to resolve.