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Understanding Fuel Surcharge

Updated on January 24, 2011

What Truckers Need to Know About Fuel Surcharge

A fuel surcharge is an extra payment to help cover the cost of your fuel. The surcharge became popular around the time fuel went over $1.20/gallon. Most large carriers include a fuel surcharge in their rates. This guarantees that they will be able to stay profitable as the cost of fuel rises.

The average 18-wheeler gets about 6.00 mpg.

The fuel charge we'll assume 6.00 mpg and $1.20 as a base fuel price. To calculate the fuel surcharge take the average price of diesel for the week and subtract $1.20, then divide that by 6. This gives you a price per mile that is added to the regular freight rate.

So, if you are making $.90 per mile and the price of fuel is $3.00/gallon…

$3.00 - $1.20 = $1.80

$1.80/6 = $.30

$.90 + $.30 = $1.20/mile

It’s important to understand how this fuel surcharge works so that you can ask the right questions when comparing lease options. If a company advertises an average pay of $1.20 a mile, that looks great next to all the companies offering $.90/mile. Doesn’t it? Well, not if they are adding their fuel surcharge to the pay. If they are their actual base pay rate may not be any higher, and might even be lower.

Some companies may use different numbers.  The last company I worked at had a good average fleet fuel mileage, so they used 6.25 mpg instead of 6.00 mpg.  This gave them an edge in getting contracts with shippers.  Other companies may use a base price of $1.25 for the same reason. Before you sign a lease, you should know what the fuel surcharge numbers are for your company.

Some companies will guarantee a minimum fuel surcharge.  This allows them to negotiate with specific shippers for less or no fuel surcharge on some accounts, but still keep their drivers happy.  Other companies will have a flat surcharge for their drivers, but negotiate higher fuel surcharge prices with the customers... pocketing the difference.  Be sure to find out if your company passes on 100% of the fuel surcharge to the drivers.

Still other companies have tried to control when and where their drivers fuel by guaranteeing a certain price at the pump (as long as you follow their fuel routing.)

All of these methods will have different effects on your bottom line.  The best one for you will depend on how you drive and what kind of mileage you get in your truck.

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What Fuel Surcharges Mean to the Consumer

I have heard a lot of people talk about the high price of fuel and how that impacts the consumer.  It's true in many cases that the people who are really paying for the high cost of fuel are not the truck drivers but consumers.

So I was hauling a truckload of canned goods to a Walmart distribution center and was wondering how much are people going to be paying for these cans now that the price of fuel is about $5/gallon.  I had 1250 cases of 24 cans each.  I drove about 2400 miles (which is Los Angeles to Atlanta).

$5.00-$1.20 = $3.80

$3.80/6 = .63/mile

2400 miles * .63/mile = $1512 extra pay for fuel

1250 * 24 = 30,000 cans

So... $1512/30,000 cans = $.05/can

I don't think that's how it worked out when I was shopping.  It seems like the prices went up a lot more than 5 cents a can that summer.  And I'm not really sure they ever came back down.  And of course, larger items would have a higher markup because you can't put as many of them on one truck.  Still, sometimes it's good to keep an eye on the stores who claim that their prices are a direct result of shipping costs or the price of fuel.

Comments

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    • profile image

      Dennis 

      4 years ago

      What if your company was taking part of the FSC being paid to you from the shipper?

      V

    • profile image

      jason 

      4 years ago

      very helpful i now understand

    • profile image

      joseph 

      4 years ago

      Thank You for this very impormtive info regrding fsc.

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