Fuel is the number one cost for drivers and it’s crucial for your financial success to recoup some of this expense. The way this expense is covered is through a fuel surcharge. A fuel surcharge is a reimbursement for the fuel expenses you incur during the delivery. It is usually added to the freight charges on either a per-mile or percentage basis. Most fuel surcharges are based on an average mile per gallon and the national average price of diesel. You are most likely receiving some form of fuel surcharge, but it’s important to understand how it is calculated and whether it is actually covering your fuel expenses.

So, how do you know what your fuel surcharge is worth? Well, as long as you know your truck’s fuel economy, you can easily calculate whether your surcharge is adequately compensating for fuel. If you get better fuel mileage than the average driver, you could actually make money off the fuel surcharge. Carriers usually structure their surcharge scale by assuming certain fuel efficiency, such as 6 miles per gallon. The surcharge is calculated on either a cents-per-mile basis or as a percentage of what the customer pays the carrier for the load.

• Cents-per-mile: Suppose a certain carrier’s surcharge is designed to cover any price increase above \$1.25 per gallon and fuel is at \$4.00 per gallon. Ideally, you’ll receive a surcharge covering the \$2.75 difference. If the average driver gets 6 miles per gallon, divide the \$2.75 by 6, then the fuel surcharge should be 45.8 cents per mile to break even. Now, if you get 7 miles per gallon, you will only need 39.2 cents per mile to break even. So you’re getting 6.6 cents more per mile than needed to break even. So, for every 10,000 miles, that’s \$660.00 extra to add to your revenue.
• Percentage: The surcharge can also be figured as a percentage of the price the customer pays the carrier. This is also simple to calculate when you know your miles per gallon. The average is 6 miles per gallon and, as we determined, you would need a surcharge of 45.8 cents per mile to break even. Assume you’re offered a 1000 mile haul for \$1100 in gross revenue. Multiply the necessary cents per mile by the total number of miles on your haul. Now, divide \$458 by \$1,100. This will show 41.6% of gross revenue will be used to cover extra fuel costs. Now, based on this and other costs, you can determine whether you’ll be making money.

Drivers can make a good profit from their fuel surcharge by using good fuel economy practices. To have good fuel economy, you need to overcome rolling resistance, air resistance, and gravity. By limiting idle time, making slower starts and stops, having proper tire inflation, and reducing your speed, you will increase your miles per gallon. This will also limit the number of fuel stops you need to make, thus increasing your productivity.

With fuel prices continually rising, getting a fuel surcharge is increasingly important. If your carrier’s surcharge is inadequate, compare those offered by other carriers. If a customer will not pay a surcharge, don’t accept the load unless you will still be making a profit. If you’re not recouping the extra fuel expenses, you’re going to lose money; it’s as simple as that. Know how fuel surcharge is calculated and whether it compensates for your actual expense. By understanding this and using good fuel economy practices to your advantage, you could save yourself several thousand dollars a year.

### Kaitlin Cathey

Kaitlin works at ATBS with the sales team. She has a Bachelor of Arts in Anthropology, from Thomas Edison State College in NJ. She was born in Colorado, but has also lived in Maryland and Illinois. Her favorite things to do are running, reading, and creative writing.

January 11, 2014

June 02, 2013

### Location, Location, Location!

April 18, 2014

Comment ()

To Joey... I disagree... As an owner operator leased to a fleet, the Fuel Surcharge makes a difference to my bottom line. It’s not smoke and mirrors. Fuel Surcharges do two things:
First, fuel surcharges allow trucking companies/brokers to bid on long term contracts more competitively. Bidding a lane or set of lanes on a yearlong contract is common and competition among Carrier’s is getting fierce. In order to ensure that a contract stays profitable, the lane bid must be insulated from the volatility of fuel prices. A run that is profitable today with fuel prices in the \$3.80 +/- range might not be so profitable if fuel goes up to \$5.00/ gallon again. Especially if those lanes are long runs.. FSC’s were designed to insulate a carrier from fuel price fluxuations in order to compete for long term contracts. The FSC just builds in a safety net to keep the net profit from the run consistent. Obviously on the “Spot Market” fuel surcharges are less important than on long term contracts.
Second, there are a lot of Owner Operator’s like myself who get paid a percentage of what the load pays. The FSC is again designed to protect the carrier and the owner operator from the ups and downs of fuel prices. If the Fleet/Carrier/Broker is getting the FSC at 100%, why shouldn’t that by passed straight through to the owner operator/lease operator. In my operation, I get 72% of the line haul and 100% of the FSC. If the FSC is there to protect us from changes in fuel prices (our biggest expense), why should I pay 28% of it to my Carrier? On a short run, this might not seem like much but those short runs add up quickly. On long runs, it makes a considerable difference.

July 12, 2013 1:42:20 AM

Great article, we have known that the FSC through our company was not going to cover our fuel expenses, but we have also been learning that slowing down, and cutting out the ideling are the 2 top issues we need to work on. Thank You for your information it is very helpful.

March 05, 2013 20:22:06 PM

I like the fuel surcharge,I'm a lease operator,and this week the fuel surcharge is 60cpm.The load I deliver tomorrow morning was 585 miles,thats \$351.00 fuel surcharge which covers all my fuel for this load plus a little extra for me since i averaged 7.1mpg getting it here,so i like it.

February 24, 2013 21:05:00 PM

Eric has a good point. The FSC was designed to keep the fuel cost at a stable level and not cover fuel expense entirely. It sure would be nice if it did though! Bottom line is, if you can run more efficiently, you will gain all the more out of your FSC and push yourself further into the black when it comes to your bottom line!

January 13, 2013 11:54:31 AM

Fuel curcharges make long term contracts easier to negotiate. Fuel costs, as we all know can be volatile. A rise of fuel costs from \$3 to \$4 during a contract will cost a 6mpg fleet an additional 17 cents per mile in fuel costs. On the spot market it does not make any difference to the independent owner operator. It does make a difference to the owner op who is leased to a company. Say an owner op get 70% of the freight rate and 100% of the FSC. The freight pays \$2 per mile gross. On a flat (no FSC) rate the owner op gets \$1.40 per mile. If the \$2 per mile includes a \$1.60 rate plus a 40 cpm -fsc the owner op gets the owner op would be getting \$1.52 per mile. On a 1000 mile load that extra \$112 buys alot of groceries.

January 11, 2013 5:16:46 AM

Good information but it needs to be said the fuel surcharge was not designed to cover 100% of your fuel expense. The more eficiently you operate, the more of the fsc you keep in your pocket.

January 10, 2013 14:52:18 PM

Knowledge is \$.

January 10, 2013 7:28:45 AM

Craig,
Yes i make out well with my fuel surcharge. That being said fuel surcharge is not the only way to figure out whether or not to accept a load. Many loads on the spot market simply pay a flat rate. When its a flat rate all you need to do is figure out how much the fuel surchage would have been and subtract it from the rate. This should be done on all assessorial charges such as drop fees, tarp charges as well as any other additional line items.

January 09, 2013 11:57:10 AM

I've worked on the inside with an agent of a large truckload carrier. In that case, the fuel surcharge (FSC) was all smoke and mirrors. Owner operators with the company received a (FSC) and outside carriers contracted to haul did not. However, the money was the same. For example, the leased owner operator was paid \$1.50 cpm plus .25 FSC for a total of \$1.75. The outside carrier was paid \$1.75 with no FSC. I suspect that's the case with most carriers. In my opinion, there should not be a fuel surcharge. Freight rates move to the left and right from day to day based on market conditions, which include fuel costs. I say, let that be the only determining factor and get rid of the "smoke and mirrors" of fuel surcharges.

January 08, 2013 18:25:55 PM

Kaitlin,

Another excellent article. Henry Albert has reached some very impressive MPG levels and I would imagine he is making good money on his fuel surcharge, assuming he charges one. He has turned this subject into an art form, so to speak.

January 08, 2013 13:34:35 PM