Trump’s executive order on tinted diesel will provide little relief, farmers and truckers say

SIOUX FALLS, SD (AP) — Farmers, truckers and economists say a move to cut taxes on diesel will bring little relief from record fuel prices that have soared since the United States attacked Iran months ago.

Industry groups said they appreciated President Donald Trump’s executive order expanding the use of diesel now reserved for off-road work, but farmers already have access to the fuel and many have already finished harvesting. Truck drivers will have difficulty adjusting to different state rules.

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“In the context of diesel prices being more than two dollars higher than last year, this doesn’t come close to healing this wound,” said Matt Perdue, president of the North Dakota Farmers Union.

With less than a month until the November election, diesel prices continue to hit record highs as some farmers haul away crops for processing and others rush to finish their fall harvest. Many are feeling the pinch as costs of inputs like diesel, fertilizer and seeds have soared due to refinery constraints and supply disruptions amid the war in Iran.

Diesel averaged $6.30 a gallon nationwide Wednesday, more than 70 percent higher than a year ago, according to the AAA auto club. The executive order defers the federal tax of $0.24 per gallon of regular diesel, used for highway projects, until the end of the year. Most states also levy their own tax on diesel.

“Dyed” diesel is the same as regular diesel except for its red dye which helps law enforcement enforce penalties for on-road use. It is already permitted for off-road purposes, such as agricultural equipment, such as tractors and combine harvesters, as well as for uses in construction and heating.

Who will see the benefits

Savings can add up if states take similar steps; many have eased restrictions or removed taxes on dyed diesel, including South Dakota and Iowa. Perdue said North Dakota has waived the tax on regular diesel. But where the state’s decision focuses on farmers, he believes the federal decision would largely benefit those at other levels of the supply chain.

The farmers who will benefit the most are those who transport their own products, such as livestock or fresh produce, on public roads. Those who have already completed their harvests will not see any savings.

“Most of our diesel consumption is behind us,” said Perdue, who grows spring wheat, durum wheat and canola on his family farm.

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Trucking companies and independent truckers may not see much relief either. The effect will likely be negligible for large trucking companies because the order is at the federal level and states set their own rules, Patrick De Haan, head of petroleum analysis at GasBuddy, wrote in a social media post.

“The largest users of diesel are the least likely to use dyed diesel,” he writes. “A national carrier crossing five or six states in one day faces enormous risks due to a patchwork of rules, legal in one state and punishable by fines in the next.”

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Many states exempt on-highway diesel from sales tax, but instead apply sales tax to tinted diesel, he said.

Easing limits on red-tinted diesel will likely have minimal effect for small truckers, who pay for fuel up front, said Todd Spencer, president and CEO of the trade group Owner-Operator Independent Drivers Association. He estimates that every $1 increase per gallon of fuel costs independent truckers about $400 more per week.

Increased demand for tinted diesel

The savings will be modest, but they could still increase competition for dyed diesel, said David Ortega, a professor of food economics and policy at Michigan State University.

“I think there is a real risk that this will backfire and make farmers worse off,” he said. “Basically, anyone who drives a truck on the highway with regular diesel can now use that diesel off-road. Even someone who owns a diesel pickup truck potentially has access to this other type of diesel.”

Perdue, North Dakota, said he expects a “rush on tinted diesel, and we’ll see how the supply responds.”

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But not all dyed diesel pumping stations are suitable for large trucks like tractor-trailers, said Paul Mitchell, professor of agricultural and applied economics at the University of Wisconsin-Madison.

“It will depend on the ability of the infrastructure to get your vehicles to a place that you can use and fill them with,” he said.

Supply shortages persist

Henry Hanscom, advocacy and public affairs manager for the American Trucking Association, stressed that the executive order provides temporary penalty relief and possible tax deferral for the use of red-dyed diesel, not an outright tax exemption. He said the ATA will review policy implementation guidance from the Internal Revenue Service when it becomes available.

Last month, Trump threatened to ban diesel exports, although he later said that measure was no longer on the agenda. On Friday, G7 countries agreed to release 100 million barrels of oil and petroleum products.

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“One of the problems we have in the world right now is that there isn’t enough diesel fuel,” said Gregg Ibendahl, an agricultural management specialist at Kansas State University.

But underlying causes such as geopolitical issues will not be resolved overnight.

“The problem that we have accumulated at the moment with the Strait of Hormuz and the war between Russia and Ukraine, these are problems to be solved in the longer term,” he said. “It will take, I think, at least a year to restore global supply, even in the best-case scenario.”

Anderson reported from New York.