Trump Expands Fuel Supply Measures as Diesel Prices Hit $6.28

With fuel costs straining American households and businesses ahead of the November 3 midterm elections, President Donald Trump is pursuing emergency supply measures and temporary tax relief to lower gasoline and diesel prices across the United States. His latest announcement, a deal with Russian President Vladimir Putin to release diesel supplies, comes as international conflicts continue to disrupt energy markets.

The average US diesel price reached $6.28 per gallon on Friday, October 9, according to the American Automobile Association (AAA), Reuters reported. Diesel prices have risen approximately 70% since the US-Israeli conflict with Iran began in February, increasing costs for truckers, farmers and other businesses that depend on fuel.

Trump said the agreement with Putin would release more than 300,000 tonnes of Russian diesel immediately, followed by 500,000 tonnes in November and another 1 million tonnes afterward. He also outlined plans for an additional 3 million tonnes within a short period, contingent on the condition of Russian refineries.

Trump presented the expected price impact as a major benefit for consumers and businesses.

"will be COMING DOWN, IN RECORD NUMBERS, AND FAST!" Trump said in a statement about anticipated diesel prices.

He also described affordable fuel as a central administration priority.

"Lower prices for Americans, especially our Great Farmers, Ranchers, and Truckers, is my Greatest Priority." Trump said.

The administration has also supported an international agreement to release 100 million barrels of oil and petroleum products through Group of Seven countries. Reuters reported that the commitment largely covers the remaining portion of an emergency release previously announced in March by members of the International Energy Agency, rather than providing entirely new supplies. A White House official disputed that characterization, saying the earlier commitments did not specifically cover refined products and that the administration had negotiated to prioritize diesel deliveries.

Trump's other major measure allows tax-exempt, red-dyed diesel normally intended for off-road equipment to be used on public roads through the end of the year. The order defers the federal highway fuel tax of 24.4 cents per gallon and waives penalties during the temporary period, but industry participation has remained limited because of tax uncertainties, distribution challenges and potential fines when vehicles cross state lines.

David Ruisard, a pricing manager at commodities intelligence firm Argus, attributed the increase in diesel prices to disruptions linked to conflicts in the Middle East and Eastern Europe.

"your price increase from about $3 a gallon up to $6 a gallon [for diesel] is 60% connected to the Strait of Hormuz, 40% connected to the Russia-Ukraine conflict," Ruisard said.

Oil shipments through the Strait of Hormuz were severely disrupted for months after the conflict with Iran began. Although crude oil flows have nearly returned to prewar levels, prices remain above $100 per barrel, according to the BBC. Russia's ongoing war with Ukraine has also contributed to pressure on global fuel supplies.

Ruisard warned that allowing tax-exempt diesel to enter the highway market could create operational difficulties for trucking companies after the temporary relief expires.

"The problem with that red dye is, it's extremely hard to clean it out of your tank," Ruisard said.

He also highlighted the financial consequences for operators whose vehicles retain dyed fuel after the exemption ends.

"The fines are pretty high for having that in your fuel tank because its considered tax evasion." Ruisard said.

He added that wider consumption of the fuel could reduce supplies available to businesses and other users that already rely on it, including rail operators.

Michael Pearce, chief US economist at Oxford Economics, said higher energy costs have contributed substantially to this year's inflation, putting additional pressure on consumers and businesses.

"The combined impact of higher rates and higher energy prices is squeezing household budgets and adding to firms' costs," Pearce said.

Pearce acknowledged that releasing additional fuel could offer temporary relief but warned that the market would remain vulnerable while disruptions continued.

"As long as energy exports from the Gulf remain disrupted, stocks will need to be drained further to supply the market," Pearce said.

He explained that replenishing depleted reserves could prolong elevated energy prices even after shipping disruptions ease.

"And the need to refill those stocks will mean energy prices remain elevated for a period, even when disruption in the Middle East clears." Pearce said.

Patrick De Haan, head of petroleum analysis at GasBuddy, said recent declines in gasoline and diesel prices may partly reflect measures introduced by the Trump administration. He cautioned, however, that the effect of individual policies is difficult to separate from wider market movements.

"A lot of that is likely due to some of the manoeuvres that we've seen the Trump administration employ over the last couple of weeks," De Haan said.

De Haan said the announcement of additional supplies had influenced market expectations even before the full volume became available.

"has worked to push prices down to some degree" De Haan said.

Trump has also considered suspending the federal gasoline tax and urged states to reduce their own levies. Ohio and Georgia are among the states that have taken steps to lower fuel taxes, while Indiana's gasoline tax reduction in May was estimated by De Haan to have cost the state government $1 billion in lost revenue.

De Haan said state taxes make up a moderate share of the amount motorists pay at fuel pumps. Suspending the federal gasoline tax would require congressional cooperation, potentially complicating the proposal before the midterm elections.

Bob McNally, president of Rapidan Energy Group, argued that temporary policy measures would have limited influence without a lasting improvement in international conditions.

"Aside from a recession that hammers consumption, the only thing that can prevent oil prices from rising further and put them on a sharp downward trajectory is a durable end to conflicts in the Arabian Gulf and between Russia and Ukraine," McNally said. "Otherwise, policy options range from marginal to counterproductive."

Economic concerns have become a significant challenge for Republicans seeking to defend narrow congressional majorities. A Reuters/Ipsos poll identified the cost of living as voters' leading concern and put Trump's approval rating at 32%, while public dissatisfaction with his handling of the economy and the conflict with Iran has added pressure on the administration before voting begins.