US president Donald Trump's order to temporarily allow on-road use of red dyed diesel is unlikely to significantly cut prices at the pump, despite claims the measure will help truckers and consumers.
Market participants said the waiver does little to tackle the main cause of diesel's recent price rise — tight supply. The measure adds no new diesel production, imports or inventories, instead allowing a wider group of consumers to draw from existing off-road stocks.
Trump's 5 October executive order permits dyed diesel, normally reserved for off-road use, to be used in highway vehicles. The order defers the federal 24.4¢/USG excise tax on diesel until year end and suggests Congress pass legislation to "eliminate the obligation to pay" the deferred tax.
"This targeted action will put money directly in the pocket of American farmers, truckers, and workers," Trump said in the order.
But any savings may be smaller than advertised — or not materialize at all — since the federal diesel tax is being deferred rather than cancelled. Although the administration has directed Treasury officials to explore ways to write off the obligation, no such relief has been enacted.
The policy's reach is further constrained by state rules. While some states, including Texas, have eased restrictions for on-road use of dyed diesel, most still ban the practice and impose heavy fines, so uptake is expected to vary widely across the country.
Distribution logistics form another barrier. Red dyed diesel typically moves through wholesale channels serving agricultural, construction and heating markets rather than retail filling stations. Increased highway demand could tighten off-road supplies and raise costs for farmers and other consumers without adding to total diesel availability.
Price data suggest the waiver will fall far short of offsetting the jump in diesel costs. Prices for ultra-low sulphur heating oil (ULSH), often used as a proxy for dyed diesel, are more than double year-earlier levels. US Gulf coast Colonial ULSH averaged $4.43/USG over the past four weeks, nearly 109pc higher than the $2.12/USG average in the same period last year.
Some truckers and fuel retailers are also wary of using dyed diesel because of compliance concerns. Industry participants cite uncertainty over how long traces of red dye may remain detectable in storage tanks and fuel systems after use, creating potential issues once the waiver ends. Interstate operators face an added risk if trucks fueled in a state that allows dyed diesel later enter one that prohibits it, where heavy penalties still apply.
Since the waiver does nothing to boost refinery output, imports or inventories, the president's move appears more likely to shift demand between fuel pools than to meaningfully cut consumers' diesel costs.
