US President Donald Trump signed an executive order to offset the impact of soaring diesel prices on American farmers, truckers and other businesses.

The order was signed on October 5 in Grand Island, Nebraska, as surging fuel costs inflict hardship on families and businesses across the United States. The administration aims to make diesel fuel more affordable and reduce transportation and food costs for Americans by easing the burden imposed by soaring diesel prices.

Tax-Free Red Diesel Gets Expanded Access

• The executive order will temporarily allow more use of tax-free, red-dyed diesel fuel, which is normally only permitted for off-road use.
• The order directs the US Treasury department to defer payment of certain federal diesel fuel taxes through 2026, and to forgo interest and penalties when legally allowed. It also directs the relaxation of enforcement of the federal law banning the use of dyed diesel on highways during the period of the deferment.
• Red diesel is essentially the same as ordinary diesel fuel but dyed red to indicate that it is normally only allowed for off-road use and therefore exempt from a Highway Trust Fund tax.

Farmers and Truckers to Benefit

The White House is touting the move as a way to provide immediate relief to farmers and truckers who are being especially hard-hit by the recent increases in diesel prices.

According to the US Department of Agriculture, the action is expected to yield about $640 million in combined federal and state savings for the 224.6 million harvested acres in the United States. On top of that, Mr Trump claimed that truckers would save more than $100 on a tank of fuel if states follow through on their parts of the plan. The White House is hoping that the fuel price relief will cascade down and reduce transportation costs, eventually leading to lower food prices and lower prices for other goods as well.

Diesel Prices Still Above Last Year

The new executive order comes as diesel prices remain well above where they were last year. According to a Times of India report citing data from AAA, the average price of diesel in the United States was about $6.32 per gallon on October 5, down from $7.16 per gallon the previous week but still comfortably above the $5.94 per gallon at the same time last year.

Supply constraints and geopolitical tensions around energy have put upward pressure on prices, with refining constraints tightening supplies and causing prices to climb.

Trump Banned Export of Diesel Fuel

Mr Trump’s latest move follows days of intense discussions inside the White House about steps to increase the supply of diesel fuel.

The President was considering more aggressive steps to increase supplies, including a ban on diesel exports from the United States. Mr Trump initially floated the idea of a total diesel export ban, but eventually decided against it as European nations began drawing down their own reserves. It is likely that Trump will continue to look for ways to increase diesel supplies while continuing to ease the burden of high diesel prices on American farmers and other truckers.

What Does the New Order Mean For American Farmers?

The new executive order will provide immediate relief for cash-strapped farmers and other diesel-fueled businesses. Still, energy analysts warn that while the Trump administration moves to lower taxes on diesel fuel use, that alone will not resolve the immediate shortage and price pressures.

Authorities are hoping that the combination of lower taxes, increased availability of dyed diesel and cooperation from states and refiners will ease the pain of higher diesel prices for now. The easing of tax burdens and increased availability of supply are expected to reduce costs for American farmers and truckers, and spill over into lower prices for food and other products.