By Charlie Decker, NFU Advocacy Coordinator
With the fall harvest fully underway, America’s family farmers are feeling the squeeze of high input costs. The U.S. Department of Agriculture’s (USDA) Economic Research Service projects that farm production expenses will climb by 4.5 percent in 2026, with fuel and oil costs accounting for up to 30 percent of the projected increase, and diesel leading the way.
Diesel is a vital fuel source for farmers and the entire U.S. economy, as it powers heavy-duty farm equipment and most commercial freight. In September 2026, the nationwide average cost of diesel reached a record high of $6.53 per gallon, up nearly $3 (or 77 percent) from the beginning of 2026, and a 25-percent increase from the previous three months.
Diesel prices have steadily risen dating back to the beginning of 2021, and various forecasts suggest they are likely to remain elevated in 2027. This is an economic time bomb that many farmers will not be able to withstand.
Over the last month, lawmakers and candidates for elected office have urged the Trump administration to act immediately to lower fuel prices. Among the proposals floated were a ban on diesel exports, suspending state and federal fuel taxes, and creating an ad-hoc diesel relief program.
Let’s dissect each of these a bit further:
- Banning diesel exports: While this move might ease diesel prices in select regions of the country, strong evidence suggests it would do the opposite in other regions and would eventually backfire altogether. The U.S. is the world’s largest diesel supplier, and an export ban would push refiners to cut production of all fuels once their reserves reach capacity, reducing the overall global supply and pushing fuel prices higher in the long run. An export ban may bring about some short-term relief for harvest season but would generate sharp increases on the horizon as farmers get ready for the spring planting season.
- Suspending fuel taxes: On October 5, President Trump signed an executive order that seeks to allow red-dyed, off-road diesel to be used on public roadways. Red-dyed diesel powers off-road vehicles like tractors, combines, and other heavy farm equipment, and it is exempt from the 24.4-cent-per-gallon federal highway tax. It is chemically identical to regular diesel, with the lone distinction being an added red dye to indicate its tax status, and it cannot be used in vehicles that use public roadways.
The president’s order has been advertised as an alternative mechanism to bypass the federal diesel tax, but there’s a catch: it provides only a deferral on these taxes through the end of the year, not a guaranteed elimination. That means the bill could ultimately come due for any diesel driver who took advantage of the waiver. And while farmers use on-highway diesel for hauling grain and livestock, suspending these taxes will provide only marginal relief given the large wholesale price increases that have occurred. The varying state laws on the use and tax of red-dyed diesel further complicate the ability of this order to provide meaningful savings.
Furthermore, in whatever form it takes, a suspension of federal fuel taxes will increase demand while supply is tight, putting upward pressure on pre-tax fuel prices. Suspending these taxes also undermine the Highway Trust Fund, which is the primary funding source for the construction and maintenance of U.S. transportation infrastructure – a high price to pay for relatively small benefits.
- Ad-hoc diesel relief: In the last decade, Congress has authorized over $100 billion in ad-hoc financial assistance for farmers. In July 2026, the Trump administration and Congress introduced another $11 billion in farm relief; however, this relief is tucked within a larger supplemental package that authorizes over $70 billion in funding for the Iran war, the very conflict that is driving up the costs of fuel and fertilizer, stoking global market chaos, and exacerbating the economic pressures weighing down farm operations. Farmers shouldn’t have to sacrifice their short-term economic health for long-term policy choices that further erode their bottom lines.
The above actions represent band aid solutions to challenges stemming from deeper, underlying wounds, and they are certainly no substitute for enacting reforms to lower fuel costs. Congress must take bold action to deliver commonsense policies that tackle the affordability crisis head-on and put American family farmers first.
Protect and promote biodiesel and renewable diesel under the RFS
Currently, the only alternatives to petroleum-based fuels available to American farmers and consumers are biodiesel and renewable diesel. The Renewable Fuel Standard (RFS) supports the growth of renewably produced fuels in the United States. It establishes the number of gallons of renewably produced fuel that must be blended into the nation’s total fuel supply each year. When properly implemented, the RFS opens transportation fuels markets to competition, drives investments in domestic fuel production, and helps increase the overall fuel supply, all of which help lower the costs of transportation fuel.
The Environmental Protection Agency (EPA) sets renewable volumes each year for total renewable fuel, including biomass-based diesel. For 2026 and 2027, EPA established historic blending volumes for biodiesel and renewable diesel, an action NFU applauded.
However, the RFS has been threatened over the last decade by an influx of small refinery exemption (SRE) petitions, which exempt certain oil refineries from part or all of the RFS renewable volumes. While SREs were intended to be a temporary measure to provide truly small and independent refiners with additional time to come into RFS compliance, regulatory actions have allowed large refiners to exploit them and effectively bypass their blending obligations, with biodiesel and renewable diesel taking the biggest hits.
Between 2017 and 2020, EPA exempted nearly 1.75 billion gallons of bio- and renewable diesel, costing producers $6.7 billion in lost revenue. Meanwhile, consumers saw practically zero savings from these SREs at the pump.
In recent years, EPA has begun to rectify this issue by reallocating previously exempted volumes from SREs. NFU has consistently urged EPA to treat SREs as the exception, as opposed to the rule when considering petitions. The EPA must also ensure previously exempted gallons are fully reallocated into future RFS volume obligations for bio- and renewable diesel.
Robust investment in renewable, low-carbon fuels
NFU supports the pursuit of balanced national energy policy that recognizes the contributions of America’s agricultural sector. Homegrown renewables, with the proper investments, are best positioned to lead the way in reducing our reliance on foreign oil and lowering overall fuel costs while providing greater demand for U.S. agricultural products.
The Next Generation Fuels Act (last introduced in the 118th Congress) would expedite the transition of the U.S. fuel supply to renewables by establishing higher octane standards for new vehicles, requiring reduced lifecycle greenhouse gas emissions, and advancing towards higher-level blends of ethanol, such as E25 and E30 (gasoline with a 25% and 30% ethanol blend, respectively). The Flex Fuel Fairness Act (introduced in July 2025) would provide regulatory credits for automakers that produce flexible-fuel vehicles that run on lower-carbon liquid fuels to legally recognize the emissions’ savings that can be achieved through higher-level blends of ethanol and expanded use of biofuels.
There are also opportunities to support advanced biofuels for diesel by reinstating the Section 40A biodiesel blenders tax credit and extending the small agri-biodiesel producer credit. The biodiesel blenders tax credit (before it expired in 2024) provided a $1 credit for every gallon of biodiesel, agri-biodiesel, or renewable diesel blended with petroleum diesel. The small agri-biodiesel producer credit provides an additional tax credit of 20 cents per gallon for the first 15 million gallons produced by small agricultural biodiesel manufacturers.
Authorize year-round E15
NFU is pushing for a permanent authorization of the year-round, nationwide sale of E15. Currently, E15 can only be sold in a handful of states during the summer months. While the Environmental Protection Agency (EPA) has issued annual waivers in recent years to allow summer E15 sales, year-to-year uncertainty creates challenges for corn growers and hinders investment and growth in renewable fuel infrastructure.
A permanent authorization will significantly boost demand for domestically grown corn and provide immediate and meaningful relief for drivers at the gas pump. The U.S. Department of Energy (DOE) recently found that E15 has been selling for $0.47 less per gallon than conventional gasoline on average, an 11.5 percent discount.
In May 2026, the House of Representatives passed year-round E15 legislation (H.R.1346, the Nationwide Consumer and Fuel Retailer Choice Act), and the Senate farm bill includes similar provisions that authorize year-round E15. Congress must get this done before the end of the year, as farmers cannot afford any more delays.
There are plenty of opportunities for lawmakers to work in a bipartisan fashion to make meaningful reforms that promote stability and affordability in fuel markets. It’s time for Congress to get serious about enacting them.
