Kerosene in its natural state is a clear, colorless liquid. To comply with U.S. federal tax law, kerosene is dyed red.
The Taxpayer Relief Act of 1997 introduced a new federal excise on kerosene and mandated that kerosene sold for uses that are not subject to tax, such as heating, be dyed red to prevent it from being sold as a substitute for taxable diesel fuel.
Retailers can still sell clear kerosene but only in restricted circumstances. Many heating-fuel retailers have chosen to sell only red kerosene.
Initially, there were concerns that components of the red dye would affect the performance of the fuel or damage heaters, but the only effect reported is some discoloration of the heater wick.