Fuel Surcharge

A fee collected by carriers to mitigate the volatility of diesel fuel prices, calculated based on the average price of fuel.

A fuel surcharge is a separate charge added to the base freight rate (line-haul) to cover the cost of fuel. It is designed to protect carriers from financial losses when diesel prices rise and to fairly pass savings to shippers when prices fall. This mechanism ensures that the carrier's compensation for fuel expenses is tied directly to the current market price, rather than being a static component of the freight rate. Most fuel surcharge programs are tied to the weekly On-Highway Diesel Fuel Prices published by the U.S. Energy Information Administration (EIA). A common method involves a matrix or formula where the surcharge, often expressed in cents per mile, increases as the EIA average price rises above a pre-determined baseline fuel price. For example, a contract might state a baseline of $1.50 per gallon, with the surcharge increasing by $0.01 per mile for every $0.05 increase in the national average diesel price. This program must be clearly defined and agreed upon in the rate confirmation before the load is accepted.

How it is calculated

((Current Fuel Price - Base Fuel Price) / Price Increment) * Surcharge Per Increment = Surcharge Per Mile

Example

A carrier's fuel surcharge program is set at $0.01 per mile for every $0.05 that the EIA fuel index is above $1.50/gallon. The EIA index is $4.00/gallon this week, which is $2.50 above the base. This results in 50 increments ($2.50 / $0.05). The fuel surcharge is therefore $0.50 per mile (50 * $0.01). For a 600-mile trip, the carrier adds a $300 fuel surcharge to the invoice.