A fuel surcharge is an extra fee charged to compensate for fluctuating fuel costs. Fuel surcharges are generally intended to protect a carrier if fuel costs increase during a shipment’s transportation.
What Is a Fuel Surcharge in Transportation and Logistics?
In freight transportation, a fuel surcharge is an extra fee charged to shippers by a freight carrier to offset fuel cost increases. Fuel surcharges are typically charged in addition to the freight rate; however, some carriers choose to offer a higher line haul rate meant to cover the cost of fuel.
How Is a Fuel Surcharge Calculated?
Fuel surcharges are based on the U.S. Energy Information Administration’s (EIA) weekly reporting of fuel costs. The rates are updated and released weekly. Major carriers, like UPS and FedEx, adjust fuel surcharges based on the rates reported for the preceding week.
Fuel surcharge calculation example:
$5.25 (current fuel cost) – $3.00 (base fuel price) = $2.25
$2.25 (current fuel surcharge rate) / 6 (mpg) = $0.42 (cents per mile, cpm)
$0.42 (cpm) x 550 (trip mileage) = $231
How Can I Reduce Fuel Surcharges?
Businesses that want to reduce fuel surcharges should work on optimizing freight networks to minimize empty miles, reduce backhaul, and prevent inefficient routing.
In addition, companies can shift contract work to carriers using electric vehicles or alternative fuel sources that don’t necessitate a surcharge. Additionally, planning shipments when on-highway diesel fuel prices are lower can help reduce overall fuel costs.
Reduce Fuel Costs and Emissions with MercuryGate TMS
How MercuryGate Helps Businesses Balance Fuel Surcharges
MercuryGate’s transportation management system (TMS) helps businesses prevent unnecessary fuel surcharges and pay fair market rates for their shipments.
From automation and exception management capabilities to modeling and optimization tools, MercuryGate TMS makes it easy to unlock end-to-end efficiency that reduces fuel consumption.
Minimizing fuel surcharges requires a TMS that can help shippers, carriers, and private fleets:
- Remove unnecessary backtracking with ongoing route optimization.
- Cut out empty miles by booking backhaul loads and tracking truck utilization.
- Optimize orders to ship during periods with historically lower fuel costs.
- Ensure available space doesn’t go to waste with load visualization tools.
- Identify fuel-efficient shipping decisions by creating network models.
- Uncover sustainability achievements and opportunities with fuel consumption, cost, and mileage reporting.
- Collaborate across functions and service providers to respond to disruptions and plan efficient truck utilization.
Making Progress on Fuel Efficiency Sustainability
Businesses focused on transportation sustainability can make progress on multiple priorities at once through strategies to:
- Reduce empty miles.
- Maximize load space.
- Consolidate shipments.
