SIOUX FALLS, S.D. (AP) — Farmers, truckers, and economists have expressed skepticism regarding President Donald Trump's executive order aimed at cutting taxes on diesel fuel, stating it will provide limited relief from record-high fuel prices that have risen significantly since the U.S. military actions in Iran earlier this year. Industry representatives acknowledged the expansion of the use of dyed diesel, typically reserved for off-road applications, but noted that many farmers already have access to this fuel and have completed their harvests. Truckers face challenges due to varying state regulations.
Matt Perdue, president of the North Dakota Farmers Union, commented, "In the context of diesel prices that are over two dollars more than they were last year, it just doesn't come close to closing that wound." Diesel prices have reached an average of $6.30 per gallon nationwide, which is over 70% higher than the previous year, according to AAA.
The executive order defers the $0.24 federal tax per gallon on regular diesel, which is used for road projects, until the end of the year. Most states also impose their own taxes on diesel fuel. Dyed diesel is chemically identical to regular diesel but is dyed red to help enforce penalties for on-road use. It is already permitted for off-road purposes, including farming equipment and construction.
Some states, like South Dakota and Iowa, have eased restrictions or waived taxes on dyed diesel. Perdue indicated that North Dakota has waived the tax on regular diesel, but he believes the federal decision primarily benefits those further along the supply chain rather than farmers. Farmers who transport their own products on public roads may benefit, but those who have completed harvesting will not see any savings.
Patrick De Haan, head of petroleum analysis at GasBuddy, noted that the executive order's impact on large trucking companies will be minimal due to the federal nature of the order and the state-specific regulations. He stated, "The largest diesel users are the least likely to use dyed diesel," highlighting the risks for national carriers navigating different state laws.
Todd Spencer, president and CEO of the Owner-Operator Independent Drivers Association, mentioned that small truckers, who pay for fuel upfront, may also see limited benefits. He estimated that a $1 increase in fuel costs could result in an additional $400 in expenses per week for independent truckers.
David Ortega, a food economics and policy professor at Michigan State University, warned that the order could inadvertently worsen conditions for farmers by increasing competition for dyed diesel. He stated, "I think there's a real chance this could backfire and make the situation worse for farmers."
Paul Mitchell, a professor at the University of Wisconsin-Madison, pointed out that not all dyed diesel pump stations are equipped to handle larger trucks. He emphasized that infrastructure will play a critical role in the effectiveness of this policy.
Henry Hanscom, chief advocacy and public affairs officer at the American Trucking Associations, clarified that the executive order provides temporary penalty relief and potential tax deferral for using dyed diesel, rather than outright tax forgiveness. He indicated that the ATA would review the IRS's guidance on the policy once available.
In the context of the global diesel supply, Gregg Ibendahl, a farm management specialist at Kansas State University, noted that geopolitical factors are contributing to the current shortage. He stated, "The problem we've accumulated right now with the Strait of Hormuz and the Russia-Ukraine war, those are going to be longer-term things to get fixed."
The executive order comes as diesel prices continue to rise, impacting farmers and truckers as they navigate the complexities of fuel costs and regulations.