President Donald Trump signed an executive order on Oct. 5, 2026, allowing dyed diesel, commonly known as red diesel, to be used in highway vehicles without the usual federal tax penalty. The order defers the 24.4 cents-per-gallon federal highway tax on red diesel used on highways from Oct. 5 through Dec. 31, 2026, according to Motor1.
Red diesel has historically been sold tax-free for off-road uses only, such as tractors, generators and construction equipment. The dye marks it as exempt from the highway tax that funds road infrastructure. Trump’s order temporarily lifts the restriction that kept that fuel out of highway vehicles.
What The Order Changes
The executive order does not eliminate the highway tax on red diesel outright. Instead, it defers collection of that tax through the end of the year while instructing the Treasury Department to explore ways to cancel the deferred bill entirely, Motor1 reported.
The order also directs the IRS to issue guidance within five days of the signing on how retailers and drivers can use red diesel on highways during the deferral window without facing penalties. That guidance is expected to spell out the mechanics, though the sources do not detail what it will say about eligibility or documentation.
At the signing, Trump described the fuel in informal terms. “For many years, farm vehicles, construction equipment and other off-road vehicles have used what’s known as red-dyed diesel. You know what that is? I don’t know what the hell it is, but whatever it is, it is supposed to be very good,” he said, according to Motor1.
What It Means For Fans Of The Agriculture And Trucking Industries
The order arrives as diesel prices have climbed sharply in 2026, driven by supply disruptions tied to conflicts involving Iran and Ukraine. National on-highway diesel averages were up one-third from January 2026 levels, Motor1 reported, and prices reached about $6.50 per gallon last month, according to Reuters.
North Dakota Gov. Kelly Armstrong framed the order as relief for farmers during harvest season. “Record-high diesel prices are squeezing our ag producers, and this is a meaningful and timely step we can take to provide temporary relief and help our farmers and ranchers through the harvest season,” Armstrong said, per Motor1.
American Farm Bureau President Zippy Duvall said the move “would provide immediate cost relief for farmers, ranchers, and agricultural haulers that continue to rely on taxable clear diesel,” according to Motor1.
Trump has claimed the order will lower the cost of goods, including groceries, by reducing diesel expenses and freight movement costs. The sources do not detail how the change affects non-agricultural truckers or everyday drivers who do not currently use dyed diesel.
Background And Context
The diesel price spike has carried political weight for Trump heading into the Nov. 3 elections, according to Reuters. G7 countries announced plans to release 100 million barrels of diesel after pressure from Trump, Reuters reported, part of a broader push to ease fuel costs ahead of the vote.
Red diesel’s dye has long served as an enforcement tool, letting regulators identify fuel that skipped the highway tax because it was meant for off-road equipment. The executive order temporarily sets that enforcement line aside for highway use without changing the underlying law that funds road infrastructure through fuel taxes.
What’s Next
The IRS guidance ordered by Trump was due within five days of the Oct. 5 signing, meaning retailers and drivers should expect clarity on penalty avoidance soon. The tax deferral itself runs through Dec. 31, 2026, with the Treasury Department tasked with exploring whether the deferred tax bill can be canceled altogether. The sources do not specify what happens to that deferred tax if Congress does not act before the deadline.
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