Trump Defers Highway Diesel Tax as Prices Hit $6.32 a Gallon, Analysts Say It Won't Move Much

Since diesel first cracked $6 a gallon nationally in September, the Trump administration has scrambled for a visible response. That response arrived Monday evening in Grand Island, Nebraska, where President Trump signed an executive order letting anyone buy tax-exempt "red dye" diesel, fuel normally reserved for tractors and other off-road equipment, for use on public highways.

What the order actually does

Road diesel carries a 24.4-cent-per-gallon federal excise tax, plus state taxes that averaged 35.5 cents per gallon as of January 2026, according to the U.S. Energy Information Administration. Dyed diesel skips both. Using it on public roads has always been illegal and can trigger fines for tax evasion, though several states already relaxed enforcement this year as prices climbed.

Trump's order defers, rather than eliminates, the federal tax on highway use of dyed diesel between October 5 and December 31, waiving interest and penalties during that window, according to Euronews and a White House fact sheet. It directs Treasury Secretary Scott Bessent, in consultation with War Secretary Pete Hegseth, to determine within five days whether conditions justify the relief and which taxpayers qualify. Treasury is also told to explore ways to cancel the deferred tax obligation entirely, but unless that happens, the money is still owed once the relief period ends.

The legal basis is a statute that lets Treasury postpone tax deadlines for people affected by disasters or military action, Euronews reported. Routing a fuel-price spike through that authority, with the Defense Department secretary consulted on a tax question, is an unusual use of emergency power, even if the underlying hardship on truckers and farmers is real.

Why prices are where they are

None of the sourcing ties the diesel spike to domestic tax policy. AAA put the national average at $6.31 to $6.32 a gallon on Monday and Tuesday, up from roughly $3.68 to $3.76 a year earlier, and down slightly from a September 22 peak of $6.53. TIME reported diesel is up 77% this year, the largest annual increase AAA has recorded since it started tracking the data in 2000.

The driver is the Iran war that followed U.S.-Israeli strikes on February 28, which has disrupted shipping through the Strait of Hormuz and damaged Middle East refineries. Ukrainian strikes on Russian refineries, Russia being a top diesel exporter, and Chinese export restrictions have compounded the squeeze, according to TIME and CNBC. Bob McNally, president of Rapidan Energy, told CNBC Americans are now spending about $700 million more per day on gasoline and diesel than a year ago. The Group of Seven agreed to release 100 million barrels of diesel and crude reserves after Trump pressure and his threat to ban U.S. diesel exports, CNBC reported.

The skepticism, and the politics

Patrick De Haan, head of petroleum analysis at GasBuddy, wrote on social media that "the dyed (red) diesel order sounds big, but most drivers won't benefit," noting states still enforce their own rules, the fuel isn't truly tax-free everywhere, and the order "doesn't add a single gallon of supply." Gregory Ibendahl, an agricultural economist at Kansas State University, told the New York Times it "probably won't do a whole lot," adding that taxes aren't the actual problem and something bigger is needed to get prices back to pre-war levels.

Matt Perdue, president of the North Dakota Farmers Union, told Newsweek his group appreciates the order, paired with Republican Governor Kelly Armstrong's earlier state-level action allowing dyed diesel on roads, but said together they "fall well short of addressing the full impact of high diesel prices." That's a fair complaint from someone who represents the people the order is supposed to help most.

The timing isn't subtle. Trump signed the order at a rally for Republican Senator Pete Ricketts, who NBC News reported faces an unexpectedly strong challenge from independent Dan Osborn, in a race where gas prices and cost of living are the top issues for voters in both parties. Trump told the crowd he didn't "know what the hell" dyed diesel actually is but claimed the order would "drive down the costs of all goods, including groceries."

State-level diesel prices show the regional spread the order has to work against: California averages $8.36 a gallon, Washington $7.33, Hawaii $7.22, while Texas ($5.73), Georgia ($5.80) and Oklahoma ($5.81) are the cheapest, per AAA data cited by Newsweek. A deferral of a 24-cent federal tax doesn't touch that gap.

Bessent's five-day determination window, which runs through roughly October 10, will show which taxpayers actually qualify for the deferral. Whether Treasury finds a legal path to cancel the tax outright, or whether truckers and farmers owe the full bill retroactively on January 1, 2027, remains an open question the order itself doesn't answer.