The US government is weighing whether to allow broader sales of red-dyed diesel as it searches for ways to bring down record pump prices, according to people familiar with the discussions. The fuel, normally reserved for agriculture, power generation and off-road machinery, is taxed at a far lower rate than the diesel sold at filling stations, so widening its availability would in effect amount to a diesel tax holiday.
The national average price of a gallon of diesel reached an all-time high of $6.53 on 22 September. It has since slipped to $6.45, but that is still $2.77 more than a year earlier. In California, drivers are paying an average of $8.40 a gallon. Because diesel powers freight, farming and construction, the surge is feeding through into the cost of an array of goods, adding to the affordability squeeze that is expected to weigh heavily on Republicans in November's midterm elections.
The tax gap is the centre of the debate. Highway diesel carries a federal levy of 24.4 cents per gallon, while dyed diesel is exempt from that charge and subject only to a 0.1 cent per gallon fee. Allowing wider sales would therefore hand diesel truck drivers a saving of 24.3 cents per gallon at best — a modest sum against a price that has risen by almost three dollars in a year.
Sceptics question how much the measure would achieve. Patrick De Haan of GasBuddy noted that farmers already use red-dyed diesel, so they would see little benefit, and that supplies would be unaffected. The overall impact on the market would be minimal, he argued, with the gain limited to the tax differential for those able to buy the fuel.
The idea has emerged after officials explored a ban on diesel exports, a proposal that alarmed oil companies and American allies who warned it would push up prices in their own markets. The American Petroleum Institute welcomed the red-dyed diesel option shortly after condemning the export ban as something that would «wreak havoc at home and abroad». In a press release, the industry group said an export ban was «not the quick fix proponents hope» and could «further raise prices here in the United States». It also pointed to Republicans who dismissed the ban as a «gimmick», «super clumsy» and something that «doesn't really move the needle».
Whether the administration proceeds with broader sales of the dyed fuel remains uncertain. Officials have not committed to a timetable, and any change would touch on tax rules that have long kept the cheaper fuel out of ordinary road use. For now, the proposal sits alongside the export ban as one of the few levers under discussion as diesel costs continue to ripple through the wider economy.