Diesel fuel prices are hovering at record highs above $6 per gallon amid the ongoing Iran war, but both energy analysts and trucking industry groups say the Trump administration’s new strategy is less a viable solution—and more of an act of political posturing.
President Donald Trump signed an executive order this week deferring taxes on the use of red-dyed diesel, a type of fuel typically only used by farmers and truckers. Because this type of fuel is exempt from highway fuel taxes, it is illegal to use on public roads. The red dye also allows a road inspector to detect whether a trucker is evading taxes by using the fuel on highways.
The tax deferral, which would theoretically increase the supply of fuel truckers had access to by temporarily relieving the tax burden of 24.4 cents-per-gallon, is in place through the end of the year.
Rather than rejoice at the prospect of more fuel with fewer strings attached, experts and stakeholders don’t see many advantages to the change. Instead, they contend, it’s a way for the Trump administration to try to save face as approval ratings continue to sink. A Reuters/Ipsos poll published this week revealed a 32% approval rating for the president, with Americans citing cost of living as their top concern.
Trump has floated a suspension of the federal gas tax ahead of the midterm elections, though the move would require Congressional approval, and it has drawn widespread criticism over concerns of it creating an additional debt burden, as the tax revenue would have to come from elsewhere in the federal budget. Patrick De Haan, head of petroleum analysis at GasBuddy, sees the red-dyed diesel tax deferral as a way for the White House to bypass Congress while appearing to the public as if it is addressing concerns over rocketing fuel costs.
“This dyed diesel waiver—it doesn’t add supply globally. It doesn’t improve the reasons that have led to high prices,” De Haan told Fortune. “It would be more akin to lipstick on a pig.”
White House Spokesperson Taylor Rogers said in a statement to Fortune the executive action “will quickly cut diesel costs and put money directly back into the pockets of American truckers,” and save them more than $100 per fuel refill.
The ramifications of a red-dyed diesel tax deferral
Chief among the concerns from industry stakeholders is that a tax deferral is not the same as a tax break, likely leaving truckers or drivers to still have to pay for the use of red-dyed diesel down the line.
“We do not expect most reputable diesel retailers and fuel marketers to do this,” the Society of Independent Gasoline Marketers of America and the National Association of Truck Stop Owners said in a joint statement to their members. “First, the tax is still owed, so there’s limited upside.”
David Russell, global head of market strategy at TradeStation Group, explained that deferrals are leaving truckers on edge because of the possibility they will still have to pay the taxes, just down the line. Trump has asked the Treasury to look for ways to eliminate the deferral, but the agency has not provided any guidance.
“You have an unusual situation where they’re basically saying, ‘We’re going to try to not enforce a tax for a period of time, and we’re going to hope that Congress later blesses that action,’” Russell told Fortune. “And if not, then we might be on the hook, or we might create a situation where gas stations need to pay that tax back to the government later.’ So it creates a lot of uncertainty.”
Even without the potential tax concerns, red-dyed diesel makes up only a fraction of the total fuel—about 30%—used by commercial vehicles, De Haan argued. Because red-dyed diesel is typically only used for specific contexts like farming, and isn’t widely available at many truck stops. The White House said more than 4,000 retailers in the U.S. distribute dyed diesel.
“It’s rarely a truck stop fuel,” he said. “Even if you wanted to find this, it may be kind of like a diamond in the rough to find.”
Solving the U.S. fuel supply problems
Analysts agreed that solving the U.S.’s fuel shortage would require larger geopolitical stabilization, such as the ending of the wars in Iran and Ukraine. Russell said that if the worst of the conflict in the Middle East were over, bottlenecks could ease—and combined with the few disruptions to the U.S.’s domestic oil production as a result of a mellow hurricane season so far, that could mean diesel prices could actually ease on their own.
“The real solution to this situation is ultimately the supply and demand in the market,” Russell said. “It would not be because of this measure with red diesel. It would be a result of the improving situation and normal seasonal dynamics.”
De Haan, however, fears a potential future spike in gas prices if Ukraine repeats its attack on Russian oil refineries—which is what Trump has attributed rising gas prices to—and suggested the best bet to increase global oil supply is for the president to keep his word to end the war in Ukraine. Otherwise, the red-dyed diesel tax deferral would have limited impact because actual fuel supply would not increase.
“Aside from solving the underlying geopolitical issues, I don’t know that there’s a great, quick win here,” De Haan said. “The president is scrambling ahead of the midterms to do something, but I just don’t know that this is really a needle mover in my mind.”
This story was originally featured on Fortune.com
