Trucking Fuel Surcharge – Brief History and Basic Methods Used
Fuel surcharges first appeared around 1973 following the first Arab oil embargo. The U.S. Department of Energy (DOE) began computing a National Retail Diesel Average in order to compensate transportation carriers for the up and down fuel prices created by the OPEC oil crisis. They went away for a couple of decades but returned as a permanent addendum to motor carriers’ rates around the middle of the 1990’s. At this time diesel fuel prices rose to the extremely high price (in those times) of $1.15 a gallon. As a result a group of retail diesel outlet representatives was formed in order to report their retail diesel prices to the DOE on a weekly basis. The DOE then used those figures to compute an average Diesel price and the number that is arrived at is then considered the National Average diesel price for that week. This average ended up becoming the baseline fuel surcharge rate that the transportation carriers use to bill their customers. Of course once it is set for the week if fuel were to increase then the carrier would lose; however the opposite would happen if fuel were to go down, then the customer would benefit. Either way, in the long run this seemed like the best case scenario to ensure that line haul rates could for the most part stay the same while the fuel surcharge could be kept separate in order for both the shipper and the carrier to keep the rates and billing transparent.
Whether it is a 3PL(third party logistics) provider or an asset based trucking company the majority use a fuel surcharge calculation based on the DOE national average. (tonto.eia.doe.gov/oog/info/gdu/gasdiesel.asp) Some may want to use a regional fuel average if their freight is contained to a certain part of the country. The reason for this is that the fuel prices could differ greatly on the West Coast versus the East Coast. For example, if a customer only shipped to the Southeastern states and those states had a much lower fuel average then they would not want the higher West Coast rates averaged in. Some shippers are now opting for an approach which seems to be the most transparent yet. This method is based on the daily fuel prices along a certain route and allows you to compute the most accurate average (updated every 24 hours). The link to their website is fuelsurchargeindex.org Another fairly common fuel surcharge method is one in which the carrier and customer agree to a surcharge percentage based off of the line haul or base rate. As you can see the methods vary and this is something that you, the shipper, will determine when analyzing your particular situation.
Fuel surcharges were a result of the Arab oil embargo and the OPEC oil crisis around 1973. The U.S. Department of Energy (DOE) began computing a National Retail Average in order to compensate transportation carriers for the up and down fuel prices created by the OPEC oil crisis.
Fuel surcharges became a permanent addendum to motor carriers’ tariffs around the middle of the 90’s, when diesel fuel rose to the extremely high price (in those times) of $1.15 a gallon. This gives us our base rate.
Fuel surcharges are still calculated using the same methods. Two of the most popular are cent per mile and a percentage of the base rate or line haul. There is no set way in which the fuel surcharge has to be determined. The only thing set in stone is the DOE’s national average.
Source by Eric Broderick