How Is the National Fuel Surcharge Index Determined?


Quick Answer

There is no universal formula for determining the fuel surcharge index. Shippers and transportation companies determine their formulas and negotiate rates with their clients. Some companies base their fuel surcharge indices on the U.S. national average fuel index, which the Energy Information Administration adjusts every month, as of 2015.

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Full Answer

Corporations such as UPS Inc. have a fuel surcharge chart that clients use to determine the cost of shipping their products. The fuel surcharge on the chart is a percentage of the national U.S. average on-highway diesel fuel price of the previous two months. If the diesel fuel price for January was between $2.78 and $2.90 per gallon, UPS sets the fuel surcharge at 5.25 percent.

One of the formulas that companies use to determine the fuel surcharge index is based on transportation mileage, and it includes three components: threshold fuel price, base fuel mileage and current fuel price fluctuation. If the cost of fuel exceeds the threshold fuel price, transportation companies apply the surcharge. To determine the surcharge, companies subtract the base price from the average fuel price and divide it by a fleet's average miles per gallon. A typical 18-wheel truck gets 6 miles per gallon, according to PLS Logistics Services.

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