Trump signs order allowing red-dyed diesel on highways through year-end to ease record fuel costs

President Donald Trump signed an executive order on the evening of October 5 that waives the off-road requirement for red-dyed diesel, the untaxed fuel normally reserved for farm and construction equipment, and lets it be used on U.S. highways through December 31, 2026. The order also directs the Treasury to defer the federal excise tax on dyed diesel used on highways through the end of 2026, without interest or penalties. According to the White House, the federal diesel tax is 24.4 cents per gallon, and it estimates savings can top $100 per fill where states match the federal move. Trump announced the order during a stop in Grand Island, Nebraska.

The move comes after diesel set records in September. AAA put the U.S. average at $6.2694 per gallon on September 15, the first time it had moved above $6 and above the prior record of $5.8159 set in June 2022, according to a Khaleej Times report. Fox Business also reported that the administration reached an agreement with Europe to release 100 million barrels of refined diesel from strategic reserves over four months.

Fuel stocks moved modestly in overnight trading after the announcement: VLO rose 0.67%, MPC 0.35%, SUN more than 3% and PSX more than 1%. The practical effect may be narrower than the headline suggests. GasBuddy analyst Patrick De Haan said the order "doesn't add a single gallon of supply" and that "states will still enforce their own rules," noting that only six states (Alabama, Louisiana, Nebraska, North Carolina, Oklahoma and Texas) have eased their restrictions.

What to watch: whether more states waive their own dyed-diesel taxes and enforcement, which determines how many drivers can actually use the fuel, and whether national diesel prices respond before the waiver expires at year-end.