I think this is usually specifically for diesel fuel. Certain places have diesel fuel with red dye in it that is tax exempt. Any fuel you buy from a standard gas station has a good amount of tax baked into the price and it’s earmarked to go towards road and infrastructure repair. The thought process is, if you’re not using said vehicle on the road, you shouldn’t have to pay this tax.

So, they dye it red, sell it only at special places, and you get fined pretty heavily if you’re found using it in street vehicles. Typically it’s truckers that do it because most American cars (including cop cars) are not diesel. And I’ve never heard of this setup for regular gas.