How big is the price gap between dyed (heating oil) and clear (on-road) diesel?

Federal excise tax is $0.244/gal. State diesel tax ranges $0.20 to $0.70/gal. Total tax gap: $0.44 to $0.94/gal. Heating oil is the dyed, untaxed side.

What is the IRS penalty for dyed-fuel road use?

IRC §6715: greater of $1,000 or $10/gallon per violation. A single 50-gallon tank of dyed fuel = $1,000. A 100-gallon tank = $1,000. A 200-gallon tank = $2,000. State penalties stack on top.

Why isn't the arbitrage worth it?

$0.60/gal saved on 50 gallons = $30. One IRS roadside inspection = $1,000 minimum. The expected value is strongly negative even at very low audit probabilities.

Dyed diesel vs heating oil arbitrage

The fuels are the same. The penalty is what makes them different. IRS

The expected-value math

A 30-gallon fill at a $0.60/gal tax gap saves $18. A single IRS inspection finds dyed fuel in your tank, penalty $1,000 minimum. Even at 1% inspection probability per fill, the expected penalty is $10 against $18 saved. Net EV: $8/fill. State penalty stacks easily make it negative.

26 U.S.C. §6715, what it says

Use of dyed fuel in a taxable use (on-road) triggers penalty equal to the greater of $1,000 or $10 per dyed gallon involved per violation. Repeat offenses multiply.IRS

State stacks (selected)

New York: TFL §513 plus tax-evasion penalties.
Pennsylvania: $1,000 per violation plus tax owed.
Maine: civil penalty up to $5,000 per violation.

Legitimate dyed-fuel uses

Residential heating.
Off-road farm and construction equipment.
Marine (in some configurations).
Stationary generators.

Cross-references

EIA SHOPP last reading: 2026-03-30NYMEX HO settled: 2026-07-13EIA next release: 2026-10-05