In its natural condition, kerosene is a clear, colourless liquid. Kerosene is coloured red to comply with federal tax regulations in the United States.
The Taxpayer Relief Act of 1997 imposed a new federal excise tax on kerosene and required that kerosene supplied for non-taxable applications, such as heating, be coloured red to prevent it from being offered as a substitute for taxable diesel fuel.
However, retailers may only sell clear kerosene under certain conditions. Numerous retailers of heating fuel have chosen to sell solely red kerosene.
Initially, it was feared that components of the red dye would impact the performance of the fuel or cause harm to the heaters, but the only recorded consequence is a slight staining of the heater wick.