Officials in the Trump administration have floated a range of measures to rein in surging diesel prices, from suspending the tax on diesel to lifting restrictions on sales of red-dyed diesel, which is normally reserved for off-road use only.
People familiar with the matter said that as of Friday the discussions remained broad, with many proposals still under review and no decision expected on any potential strategy in the near term.
According to these people, Vice President JD Vance, Energy Secretary Chris Wright, Interior Secretary Doug Burgum and Treasury Secretary Scott Bessent have all taken part in the discussions. Vance has been pressing for action, including a ban on diesel exports.
Dyed diesel, also known as red diesel, is typically used by farmers and other off-road users and is exempt from tax. Global diesel markets were thrown into uncertainty this week after U.S. President Donald Trump voiced support for the idea of restricting U.S. diesel exports. Trump's economic advisers are analyzing the potential impact of a possible short-term ban.
Wright, however, said the administration is working with refiners in the hope that they will voluntarily limit diesel exports as an alternative to government intervention.
Diesel prices at U.S. gas stations are holding steady at around $6.50 a gallon, close to a record high. Trump's proposal to halt exports drove sharp swings in fuel futures this week and drew strong opposition from the industry.
With the U.S.-Iran war and the Russia-Ukraine war reducing global fuel supplies, key overseas allies, especially European countries, are increasingly worried about the economic consequences of losing access to U.S. diesel.
Oil company chief executives and other industry stakeholders are urging government officials to suspend the federal diesel excise tax, arguing that doing so would deliver tangible relief to consumers ahead of the November midterm elections without any of the drawbacks triggered by a diesel export ban.
How to exempt the tax, however, has sparked internal disagreement within the administration, particularly given that the House of Representatives is in its pre-election recess.
Off-road diesel is chemically identical to the diesel most drivers across the United States buy at gas stations. The difference is that it is exempt from state and federal excise taxes and is legally barred from use on U.S. highways.
To prevent highway motorists from buying the cheaper fuel, it is dyed red so that law enforcement can detect whether a vehicle is using non-compliant diesel.
According to the U.S. Energy Information Administration (EIA), the federal tax on diesel is about 24 cents a gallon, with state taxes adding an average of roughly another 36 cents.
Lifting restrictions on off-road diesel sales could bring the price farmers pay for diesel back below $6 a gallon, a sizable drop, but still far above the level of less than $4 a gallon before the U.S. and Israel went to war with Iran.
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