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Fuel surcharges are not all created equal

Ray Bohman -- Logistics Management, 9/1/2001

For some time now, most for-hire motor carriers have been adding fuel surcharges to their net freight charges, and there seems to be no letup in sight. Generally, truckers have established their surcharges individually, although a number have adopted surcharges that were set up collectively by regional motor carrier rate bureaus. And while surcharges tend to follow pretty much the same pattern, they are by no means identical.

Most surcharges are tied to the index of average diesel fuel prices compiled every Monday by the Department of Energy's Energy Information Administration, based on reports from 350 self-service diesel fuel centers located throughout the country. These are released at 4 p.m. EST on Mondays. [The phone number is (202) 586-6966.]

Most carriers use a scale of percentage surcharges that change when the average price moves from one five-cent increment to the next. Figure 1 is an example taken from a scale that several major national LTL carriers have adopted.

Surcharges can vary from week to week if the average price moves into another bracket, but not all carriers make their changes that same day. Many adjust their surcharges, if required, on the following Wednesday, although we've seen some that will adjust their surcharges the next day—Tuesday—or wait until the following Monday.

As I mentioned, not all surcharges are identical. For example, one regional motor carrier rate bureau maintains the scale in Figure 2.

Another interregional carrier whose surcharges we reviewed maintains two different percentages, depending on the territory involved. For example, in one price bracket—the 135.0- to 140.0-cent national average price per gallon—the trucker charges a 4.0-percent surcharge on LTL shipments in one territory and 6.0 percent in the other. Likewise, it charges 7.0 percent on truckload shipments in one region and 9.0 percent in another.

Most carriers base their surcharges on the weekly national average price, but a handful of regional carriers tie theirs to the weekly average price for their region or subregion, such as the Lower Atlantic region. A few carriers have also established minimum surcharges, such as $2.00 per shipment.

All of this should make it clear that you can't assume that all fuel surcharges are created equal.

Fig.1 LTL Fuel Surcharge Scale
Avg. Nat'l Price per Gallon Type of Shipment LTL Type of Shipment TL
130.0¢ - 135.0¢2.50%4.50%
135.0¢ - 140.0¢3.00%5.00%
140.0¢ - 145.0¢3.50%5.50%

Fig. 2 Rate Bureau Fuel Surcharge Scale
Avg. Nat'l Price per Gallon per Type of Shipment LTL Type of Shipment TL
130.0¢ - 135.0¢2.50%6.00%
135.0¢ - 140.0¢2.75%6.50%
140.0¢ - 145.0¢3.00%7.00%


Author Information
Ray Bohman, a well-known consultant and author, is editor of several highly successful newsletters on transportation and is a consultant to a number of national trade associations. He is president of The Bohman Group, consultants and publishers in the freight-transportation field. His offices are located at 27 Bay Lane, Chatham, MA 02633. Phone: (508) 945-2272.

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