US diesel prices remain persistently elevated, and the Trump administration is weighing a range of intervention measures 鈥?from suspending the federal fuel tax to relaxing "red diesel" restrictions 鈥?while an export ban proposal has not been entirely removed from discussion. However, as of now, no policy decision is imminent, and internal debate is still ongoing.

According to Bloomberg, the discussions involve key officials including Vice President JD Vance, Energy Secretary Chris Wright, Interior Secretary Doug Burgum, and Treasury Secretary Scott Bessent. Vance has explicitly urged action to curb rising diesel prices and has proactively inquired about available policy options. Meanwhile, Wright revealed that the government is negotiating with refineries to seek "voluntary cuts" to exports as an alternative to a mandatory export ban, in order to avoid industry backlash triggered by direct administrative intervention.

These developments have had a notable impact on the market. This week, after Trump publicly expressed support for restricting diesel exports, fuel futures experienced sharp fluctuations; some refineries have begun adding protective clauses to contracts to guard against the risk of being unable to fulfill obligations if an export ban is imposed. Major US allies such as Europe have also expressed deep concern about potentially losing US diesel supply, believing such a move would further intensify energy pressure amid an already tightening global fuel supply landscape.

Pump Prices Near Record Highs, Several State Governors Take Early Action

US diesel retail prices are currently holding steady at around $6.5 per gallon, near record levels. Facing intense pressure, several Republican governors have taken action ahead of federal-level decisions.

Louisiana Governor Jeff Landry declared a state of emergency earlier this week, suspending penalties for farmers and loggers using off-road diesel on highways, with the measure extending through the end of October.

"We will not stand by and watch Louisiana farmers harvest their crops at record prices," Landry said in a statement.

Alabama Governor Kay Ivey followed suit, directing state law enforcement to halt restrictive enforcement on red diesel for a period of four months.

Nebraska Governor Jim Pillen signed an executive order allowing highway-registered vehicles to use off-road diesel without penalty, and announced diesel tax refunds for vehicles transporting livestock and agricultural products.

Red diesel (dyed diesel) is chemically identical to regular on-road diesel, with the only difference being that it is exempt from state and federal excise taxes and is legally prohibited from highway use. Law enforcement identifies it through fuel dyeing to prevent highway users from purchasing cheaper off-road diesel.

Tax Suspension Proposal Gains Most Support, Congressional Recess Creates Obstacles

According to Bloomberg, oil company executives and industry stakeholders have been actively lobbying government officials, strongly promoting a suspension of the federal diesel excise tax. They view this as the optimal path to deliver tangible price relief to consumers before the November midterm elections while avoiding the side effects of an export ban.

According to US Energy Information Administration (EIA) data, the federal diesel tax is approximately 24 cents per gallon, and combined with an average state tax of about 36 cents per gallon, the total tax burden is approximately 60 cents per gallon. If off-road diesel restrictions are relaxed, farmers' purchase prices could potentially fall back below $6 per gallon, providing meaningful relief from current levels, though still far above the sub-$4 range seen before the US-Israel war with Iran.

However, the tax suspension proposal has encountered resistance within the government. The core obstacle lies in how to technically implement the tax exemption 鈥?especially as the House of Representatives is currently in its pre-election recess, limiting the legislative window for advancing the measure.

Biofuel Exemption Rejected, Refineries Brace for Export Ban

Another industry proposal 鈥?exempting or reducing biofuel blending quotas 鈥?has been essentially rejected by the government. Blending mandates for corn ethanol and soybean biodiesel hold significant political importance for the US agricultural heartland, and the government is unwilling to touch this sensitive issue.

The export ban proposal, despite facing enormous resistance, has not been removed from the discussion table. Some refineries have already taken precautions. Bloomberg, citing people familiar with the matter, reported that relevant companies are adding protective clauses to contracts to address default risks arising from being unable to deliver to overseas buyers if exports are suspended.

Meanwhile, concerns in Europe continue to escalate. With global fuel supply already tightening under the dual pressures of the US-Iran war and the Russia-Ukraine conflict, if US diesel exports suddenly contract, alternative sources for the European market would be extremely limited, and the potential economic impact cannot be ignored.

Currently, internal White House discussions remain divergent, with all proposals in the evaluation stage, and the final policy direction remains unclear. Market uncertainty is expected to persist, and fuel futures price volatility may further intensify.