How Do Trucking Fuel Surcharges Work?

How Do Trucking Fuel Surcharges Work?

How Do Trucking Fuel Surcharges Work?

Fuel surcharges help truck operators compensate for fuel price increases. Surcharges are based on the average pump price compared to the fuel baseline used to calculate the surcharge. As of 2015, baselines run from $1.15 to $1.20 per gallon (roughly coinciding with OPEC's base target price), depending on the region.

Because fuel prices are volatile, trucking businesses can lose money when the price of fuel eats up their operating budgets. To adjust contracted shipping fees to account for the unexpected rises in fuel costs, trucking businesses can negotiate fuel surcharges with their clients that apply when fuel costs rise above a specified level.

To negotiate a fuel surcharge, a trucking company and client first agree on a baseline fuel price. Standard industry baselines are $1.15 to $1.20 per gallon, while the Owner-Operator Independent Drivers Association recommends $1.25. The U.S. Department of Defense uses a baseline of $2.50 per gallon.

To calculate a fuel surcharge, divide the fuel baseline price by the number of miles per gallon (usually 5 to 7 miles per gallon). The result is a per-mile fuel charge. For example, using a fuel baseline price of $1.25 per gallon for a truck that gets 5 miles to the gallon, the fuel surcharge is 25 cents per mile.