Red-dyed diesel this week became the subject of President Donald Trump’s rally in Nebraska, as Washington battles to relieve surging energy prices in the United States ahead of the midterm elections.
Trump signed an executive order at the Monday evening rally, telling attendees it would allow anyone to purchase tax-free red-dyed diesel, a measure the administration estimated could save truckers over $100 per refill.
“This order will also drive down the costs of all goods, including groceries,” Trump told the crowd. “We’re not going to need it long, I hope, we’re not going to need it long because your prices are plummeting and they’re going to really be plummeting.
But what exactly is the significance of Trump’s executive order?
Red-dyed diesel is the same as regular diesel, except for coloring added to the fuel that tells inspectors it is exempt from taxes, making it harder for truckers to evade regulations banning them from using the cheaper fuel.
The red–dyed fuel is not subject to federal or state taxes applied to regular diesel sold for highway transportation that fund road construction and maintenance. The dyed fuel is allowed for use for off-road purposes, for industrial equipment and vehicles operating on construction sites and farms, such as tractors.
Truckers are banned from using red-dyed fuel as they must purchase diesel that is taxed, which amounts to over 24 cents per gallon in federal levies and an average state diesel tax of around 35.5 cents per gallon. They are typically subject to hefty fines if found using the dyed fuel, because it constitutes tax evasion, signaling their highway taxes have not been paid.
Trump’s move to allow truckers to use red-dyed fuel marks an effort to lower energy costs in the country, after diesel prices skyrocketed for a number of reasons, including changes to the supply caused by the Ukraine and Iran wars.
Diesel prices reached $6.32 a gallon on Monday, down from a peak high of $6.53 on Sept. 22, but a significant spike from $3.76 a gallon before the Iran war started in February, according to AAA. The national average diesel price was $6.38 on Monday, according to the Energy Information Administration.
Experts have cast doubt on whether Trump’s executive action freeing up red-dyed fuel would solve the underlying issues causing energy prices to surge. The president’s move on Monday came just weeks before the country votes in the midterm elections, which are expected to bring some tough results for the Republican Party if historical precedent holds.
“While expanding access to the tax-exempt diesel could provide some relief to eligible end-users, it would not change the underlying wholesale diesel price,” Rystad Energy analyst Preben Sorli told Reuters. “Refiners would still receive market price for their fuels, and the main effect would be lowering federal tax revenues. It would do little to change supply or market fundamentals.”
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The president’s executive order echoes moves made by multiple states, including North Dakota, to expand legal access to red-dyed fuel.
In the past two weeks, 10 states that make up around a third of diesel sales, including Texas, Oklahoma, and Alabama, have loosened restrictions, according to research firm ClearView Energy Partners.
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[ H/T Washington Examiner ]
