Fuel Surcharge

A fuel surcharge is a variable fee added to the base freight rate that adjusts automatically based on changes in diesel fuel prices. The fuel surcharge mechanism allows carriers and shippers to share the risk of fuel price fluctuations rather than embedding a fixed fuel cost assumption into the base rate. When fuel prices rise, the surcharge increases; when fuel prices fall, the surcharge decreases, keeping the base rate stable.

Most fuel surcharge schedules are indexed to the US Department of Energy's weekly national average diesel price, published every Monday. The surcharge is calculated using a table or formula that specifies a surcharge percentage for each price increment. For example, a typical schedule might set the surcharge at 20 percent of the linehaul rate when diesel is at $3.50 per gallon, increasing by 1 percent for each $0.05 increase in the price of diesel.

Fuel Surcharge vs. Reefer Fuel Surcharge

It is important to distinguish between the standard fuel surcharge, which covers the diesel consumed by the truck's main engine for propulsion, and the reefer fuel surcharge, which covers the separate diesel consumed by the trailer's refrigeration unit. These are two distinct charges because the fuel consumption patterns are different. The main engine consumes fuel based on miles driven, while the reefer unit consumes fuel based on hours of operation, ambient temperature, and the target temperature setting.

Shippers should review their fuel surcharge provisions carefully during rate negotiations. Key points to evaluate include the fuel price index used, the base price at which the surcharge starts, the surcharge increment structure, whether the surcharge is applied to linehaul charges only or to all charges including accessorials, and whether the reefer fuel surcharge is bundled with or separate from the standard fuel surcharge.