The IRS has switched on the president’s diesel order, and two very different questions are now on the table. Does a penalty waiver put a dent in the price at the pump? And what does it cost to buy fuel from Moscow?
Energy Policy · Fuel Prices
Diesel Relief Is Official, but Truckers Say It Won’t Lower Prices. Then Came the Russian Deal
The IRS has switched on the president’s diesel order, and two very different questions are now on the table. Does a penalty waiver put a dent in the price at the pump? And what does it cost to buy fuel from Moscow?
The relief is real. The price drop isn’t.
On October 14, nine days after President Donald Trump signed Executive Order 14435, “Emergency Tax Relief on Diesel Fuel,” the Internal Revenue Service issued the rules that put it to work. For the rest of the year, the agency says, it will not penalize anyone for selling or burning dyed diesel on public highways, fuel that is normally restricted to farms and construction sites because it carries no federal road tax. The relief is retroactive to October 1 and runs through December 31.
The order was sold as help for farmers and truckers squeezed by fuel costs. Trucking trade associations have a different view. They describe the relief as minimal, say it would be complicated to carry out, and warn that it does little to increase the supply of fuel itself. Within days, a separate deal to bring Russian diesel to global markets pulled the whole conversation into foreign policy.
What the IRS Actually Did
The announcement, numbered IR-2026-122, does three things. It waives penalties for dyed diesel sold for highway use or used in diesel vehicles on highways anywhere in the country. It covers penalties tied to missed semimonthly tax deposits and to inadequate recordkeeping. And it tells sellers and distributors they do not have to investigate or document how the fuel they sell is eventually used. Ordinary collection procedures are suspended, fuel compliance officers are being reassigned, and the agency says it will conduct no federal inspections of on-road dyed fuel during the period.
Read closely, the release is narrower than some early summaries made it sound. It waives penalties. It does not say the underlying tax disappears. The executive order also directs Treasury to allow a deferral of certain diesel excise taxes, the 24.4 cents per gallon federal levy, for amounts incurred from October 5 through December 31, without penalties or interest to the extent the law allows. But the IRS says that guidance, including how Form 720 will work and when deferred amounts come due, is still to come. The order further tells Treasury to explore ways, including legislation, to eliminate the obligation to pay the deferred amounts, which is a long way from a promise to do it.
A penalty waiver isn’t a price cut. It’s permission.
Why Truckers Aren’t Cheering
The trucking industry’s objection is practical. Dyed diesel is the same fuel as the clear kind, tinted red to mark it as tax exempt. It exists mainly in farm and construction tanks, not at truck stops, so letting highway drivers legally burn it does nothing to put more of it where long haul carriers can buy it. Trade groups also say the mechanics are messy: fleets that fill up from a farm supplier would need to sort out who owes what, and the savings, where they exist, are small next to the cost of a fill-up.
Those savings are modest for a reason. Diesel prices have jumped since the Gulf conflict began in late February, from $3.81 a gallon to $6.19 in early October by federal figures, a rise of about 78 percent, and AAA put the national average near $6.28 this week. A tax deferral of 24.4 cents is roughly four percent of that. For a driver who burns thousands of gallons a month, it matters. For a trucking company watching its margins collapse, it doesn’t change the picture.
National average diesel prices per gallon as reported by federal data and AAA, compared with the size of the federal tax at issue.
Fine Print for Drivers
The federal waiver does nothing about state rules. Each state taxes highway fuel on its own, and a driver using dyed diesel could still face state penalties or audits unless the state has matched the federal relief. Many, but not all, states have, according to the IRS, and the order asks the White House to press the rest. Check your state’s revenue agency before filling a truck with off-road fuel.
The Russian Diesel Deal
The second half of the story is more combustible. After a call with Vladimir Putin, Trump announced an arrangement to bring Russian diesel to world markets in stages: about 300,000 tonnes in October, 500,000 in November and a million thereafter, roughly 13.5 million barrels in all. U.S. purchases of Russian diesel were authorized through next April, and sanctions on Russian oil products are suspended until then, by reports. Moscow has suggested that supply could reach 3.5 million tonnes a month by year’s end, though analysts doubt it has that much to spare.
The backlash came fast. A bipartisan group of senators, including Republicans Susan Collins, Lisa Murkowski, Thom Tillis and John Curtis, urged the president to reverse course immediately. Mike Rogers, the Republican Senate candidate in Michigan, distanced himself from the plan. Trump, facing the criticism, called it “not a USA deal,” a deal “for the world” rather than with him, and said farmers would benefit. Asked whether Russia could use the money against Ukraine, he said, “Nobody’s told me anything.”
Europe and Ukraine React
In Europe the deal opened a new rift over the war. President Volodymyr Zelenskyy said it weakens sanctions and signals weakness, while European leaders made Ukraine’s funding a priority at this week’s summit. One regional energy analyst called the move purely political and argued that a G7 release of 100 million barrels from strategic reserves would do more for prices. Ukraine has said it has destroyed about half of Russia’s refining capacity, which is a large part of why Russian exports are constrained at all.
The oil industry has mostly shrugged. Wholesale diesel prices, as one fuel analyst put it, were not blinking at the news, and truckers and farmers should not expect relief soon. Some experts also questioned whether the arrangement is consistent with U.S. law, a question that is likely to keep lawyers and lawmakers busy long after the first shipment, if one ever arrives.
What supporters say
The administration argues that adding supply and easing tax rules will give farmers and truckers a break in a hard season, and that talking to Moscow can help end the wider war.
What critics say
Senators of both parties argue the deal rewards Russia and undermines allies, while trade groups say the tax relief is too small and too tangled to help.
What markets say
So far, not much. Wholesale prices haven’t moved, and analysts doubt Russia has the refining capacity to change the global picture.
How the Week Unfolded
- October 1Date from which the penalty relief applies, retroactively.
- October 5President Trump signs Executive Order 14435.
- October 12 to 13The Russian diesel plan draws bipartisan criticism in the Senate and objections from Europe.
- October 14The IRS issues its rules and confirms relief through December 31.
- Coming weeksTreasury guidance on the excise tax deferral, and the first scheduled Russian shipments.
The honest summary is that two policies aimed at the same pain point are moving in opposite directions. One is a modest domestic tax gesture that most of the industry says will not move the needle. The other is a large foreign policy gamble whose supply math looks doubtful and whose political cost is already high. Neither does much about the thing driving prices up in the first place, which is a world short of the fuel its economy runs on.
