How Much Money Red-Dyed Diesel Expanded Use Could Mean

State and federal executive orders designed to save some of the additional money farmers and landowners have been paying for fuel costs come with a reminder: you might owe later on this temporary price reduction.

Diesel prices have jumped 60 to 70 percent since President Donald Trump began the war with Iran. Severe supply disruptions in the Strait of Hormuz and tighter global refinery capacity largely fueled the increase.

President Trump issued an executive order on Tuesday that temporarily allowed highway use of red-dyed diesel to fuel additional vehicles rather than restricting that fuel use for non-highway agricultural equipment like tractors, combines, and irrigation pumps.

“Today, I am announcing another unprecedented step to bring down costs. For many years, farm vehicles, construction equipment, and other off-road vehicles have used what is known as 'red dye' diesel... which is exactly the same as normal diesel but is sold tax-free for off-road vehicles and big trucks... Tonight, I am going to sign a historic Executive Order to officially waive the off-road requirement and allow anyone to purchase tax-free red dye diesel for any reason,” the President's news release stated.

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What Is Red-Dyed Diesel?

The diesel contains red dye to serve as a deterrent for drivers, so they don't try to use it for fueling vehicles for road use and avoid the federal highway excise tax.

Trump's actions would defer 24.4 cents per gallon by avoiding the federal highway excise tax. His federal order followed actions by 10 states, Alabama, Arkansas, Indiana, Louisiana, Missouri, Nebraska, North Carolina, North Dakota, Oklahoma, and Texas, that reduced restrictions on the use of tax-exempt diesel fuel.

Other states including Illinois and Iowa have since followed with actions to suspend tax obligations on dyed diesel fuel.

Why Did Trump Announce the Order at a Nebraska Campaign Event?

President Trump announced his executive order at a campaign rally in Nebraska, one of the traditionally Republican voting states he is visiting before November's mid-term elections.

Nebraska, Iowa, Kansas, and Ohio are among close U.S. Senate races where Republicans are trying to hold onto seats to prevent Democrats from taking over the majority in the chamber. They are also key agricultural states where farmers rely on diesel, especially at harvest time.

Could Red-Dyed Diesel Expansion Raise Home Heating Oil Costs?

Higher diesel costs could also force prices up on some home heating oil. And that could be another financial factor in two New England states, Maine and New Hampshire, which also have critical U.S. Senate races for the two major political parties.

How much farmers will save from the executive orders on red-dyed diesel will vary. It is one of the factors to consider.

Cost savings: 24.4 cents per gallon in federal taxes, in addition to what an individual state might have changed. That combination will reduce prices. But many users will still end up paying about $2 more per gallon right now because of how much diesel has risen since the war with Iran began.

The President's federal order lasts until December 31, 2026. His action defers taxes on the red-dyed diesel fuel; it does not eliminate it. It takes Congressional action to do that. Farmers could end up owing the tax in 2027.

RELATED: This farmer expects to pay tens of thousands more for harvest this year.