U.S. weighs tax-free red diesel as alternative to export ban

  • U.S. officials are considering wider access to tax-free red-dyed diesel.
  • Red-dyed diesel could reduce prices by nearly $0.244 per gallon through tax exemption.
  • Diesel prices topped $6.50 per gallon earlier this month before falling to $6.45.

The U.S. federal government is considering expanding access to red-dyed diesel, a tax-exempt fuel used in agriculture and construction, as an alternative or supplement to a proposed 90-day diesel export ban. The fuel is nearly $0.244 per gallon cheaper because it does not pay the federal highway tax, but critics say broader access would not increase supply or reduce market prices. Diesel recently exceeded $6.50 per gallon before easing to $6.45, as constrained Persian Gulf exports and stronger U.S. shipments to Europe tightened global markets. The United States produces about 5.1 million barrels of diesel per day, consumes roughly 3.6 million barrels and exports 1.2 million barrels, yet global disruptions continue to influence domestic prices. President Trump supports an export ban, while Energy Secretary Chris Wright has warned it could ultimately raise fuel costs by forcing refiners to cut operating rates and reducing gasoline supplies.

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