On-road vs off-road diesel: what is the difference?

On-road and off-road diesel are, in most cases, the same ultra-low sulfur fuel. The difference is tax: on-road diesel carries the federal and state highway fuel taxes, and off-road diesel is dyed red to show it was sold without them, for equipment that does not run on public roads. Everything else follows from that split: the color, the pump notice, the penalty for dyed fuel in a truck, and why the DOE diesel price that fuel surcharges peg to is an on-road price.

The same fuel since 2014

For years the two were different fuels. EPA phased ultra-low sulfur diesel, 15 parts per million of sulfur or less, into highway diesel from 2006 to 2010 and into nonroad, locomotive and marine diesel from 2007 to 2014. Since 2014 EPA has required all nonroad, locomotive and marine diesel to be ULSD too, with some exceptions for older locomotive and marine engines. So the red fuel in a farm tank and the undyed fuel in a truck are usually the same product, split at the terminal by what it will be used for and therefore how it is taxed. EIA notes that heating oil is dyed red as well.

What off-road diesel is for

EIA describes off-road diesel as fuel for equipment and vehicles that do not usually run on public roads: on farms, railways and construction sites, and for electric power generation. The IRS calls the qualifying purposes nontaxable uses. Two of the common ones are use on a farm for farming purposes and off-highway business use, which IRS Publication 510 defines as fuel used in a trade or business other than in a highway vehicle registered, or required to be registered, for use on public highways.

The dye and the pump notice

The red is a federal rule, not a supplier's choice. Treasury regulations require dyed diesel to carry the dye Solvent Red 164, and no other dye, at a concentration spectrally equivalent to at least 3.9 pounds of the standard Solvent Red 26 per thousand barrels (26 CFR 48.4082-1). A seller of dyed diesel must post a legible, conspicuous notice on any retail pump it sells from, reading "DYED DIESEL FUEL, NONTAXABLE USE ONLY, PENALTY FOR TAXABLE USE" (26 CFR 48.4082-2). That notice is the sticker on an off-road pump. On-road diesel is undyed.

The tax gap

The federal tax on on-road diesel is 24.4 cents a gallon: a 24.3-cent excise plus a 0.1-cent leaking underground storage tank tax. Dyed diesel used for a nontaxable purpose owes only the 0.1-cent tax (IRS Publication 510). States add their own diesel taxes, which averaged 35.9 cents a gallon in EIA's July 2026 table, and EIA notes that off-road diesel is not subject to the state and federal excise taxes. Sales taxes are another matter and vary by state. California, for one, charges its 48.2-cent diesel excise and a 13% state sales tax on highway diesel, while dyed diesel used off-road pays a 7.25% sales tax and no excise, per the California Department of Tax and Fee Administration.

Worked example: the tax inside this week's number

For the week of Nov 2, 2026 the DOE number was $6.292 a gallon. About 60 cents of that is highway fuel tax a dyed gallon used off-road does not owe: the 24.3-cent federal excise and state taxes and fees that averaged 35.9 cents in July 2026 (EIA). That is 9.6% of the pump price. EIA publishes no off-road diesel price, so subtracting the taxes does not give the price of a dyed gallon, which carries its own delivery costs and any sales tax. What it does show is the size of the wedge the red dye marks, and why the penalty for crossing it is steep.

The penalty for dyed fuel in a highway truck

Running dyed diesel in a registered highway vehicle is a taxable use of fuel sold without the tax. Federal law sets the penalty for each act at the greater of $1,000 or $10 a gallon of the dyed fuel involved, and raises it for each prior penalty (26 U.S.C. 6715). A truck found with 150 gallons of dyed fuel in its tanks faces $1,500 on that count, plus the tax. States run their own dyed-fuel enforcement on top.

Claiming back the tax on undyed fuel used off-road

The rule also runs the other way. A buyer who pays for taxed, undyed diesel and burns it for a nontaxable purpose, such as off-highway business use or farming, may be able to claim a credit or refund of the federal tax. IRS Publication 510 lists the uses that qualify and the ways to claim: Form 4136 with an income tax return, Schedule 1 of Form 8849, or Schedule C of Form 720, with records of the gallons bought and used. That is the on-road diesel rebate people ask about. The rules and the records are the IRS's; this guide is not tax advice.

Why the benchmark is an on-road price

The DOE number is EIA's weekly survey of the retail price of on-highway diesel, taxes included, and EIA says it does not publish off-road diesel prices at all. Fuel surcharges are written against it because it prices what a highway truck can legally burn: the fuel that carries the federal and state highway taxes. A schedule built on an untaxed price would leave that wedge out of every gallon. The fuel surcharge guide shows the mechanic, What is ULSD? covers the fuel spec itself, and What is IFTA? covers how road fuel tax is split between the states a truck runs through.

Monday Diesel explains how fuel taxes and the benchmark work. It does not give tax or legal advice, and it does not tell anyone which fuel to buy or where.

Monday Diesel is a free weekly read of the DOE diesel number and what it does per mile. Built entirely from EIA's public data, in your inbox before dispatch, one email a week.