Fuel Surcharge Calculator

fuel surcharge calculator

What you need to know: Currently there’s no rule, law, or regulation mandating a fuel surcharge.

Small carriers with direct shipper freight contracts must incorporate a fuel surcharge.
Good carriers will typically pass through 100% of the fuel surcharge to their leased-on owner-operators (OO). This allows the leased OO to offset the higher price of fuel.
- Make sure your lease-agreement includes the 100% pass through.

A fuel surcharge is a separate, additional fee added above the current contract rate when the cost of fuel exceeds a defined level.

Key terms to understand:

Average Miles Per Gallon (mpg) – The average fuel consumption for a loaded big rig today is about 6 mpg.
Fuel Price Baseline – This is the fuel cost amount you used in figuring your cost of operation.
Average Diesel Fuel Price – The U.S. Energy Information Administration (EIA) posts the average diesel price every Monday.

Today, carriers typically increase their fuel surcharge one penny for every 6 cent increase in diesel price above their established baseline.

For example, if a carrier figures their cost of operation with a fuel price baseline of $2.50, then they would incorporate a fuel surcharge whenever diesel prices rise above this figure.
If the price of fuel increased to $2.56 per gallon, then the carrier would institute a fuel surcharge of $0.01 per mile.
If fuel increased to $2.62, they would charge $0.02 per mile and so forth.

The calculation is simply this…

Take the current fuel price, which as of 3/14/22 was $5.25 per gallon,
minus the fuel price baseline ($2.50) taken from the carrier’s cost of operation figures,
which equals a difference of $2.75 per gallon.

The second calculation is to…

divide the difference by the average mpg – or $2.75 ÷ 6.0 mpg = $0.46 per mile.

Or, one could simply add a 0.01 cent per mile (cpm) surcharge for every 0.06 cent rise in the pump price of fuel as mentioned earlier.

Key take aways:

A fuel surcharge isn’t meant to cover the complete cost of fuel.
You cannot get around knowing your cost of operation, meaning you need to know how much to charge in order to make a profit.
Remember a fuel surcharge is meant to help offset an increase in diesel prices.
Most OO’s running under their own authority operate in the spot market, meaning they go through brokers to obtain freight rather than having a contract with a direct shipper.
Brokers don’t typically pay a fuel surcharge, so you will want to incorporate your fuel surcharge in your all-inclusive rate negotiations.

OOIDA’s Fuel Surcharge Calculator helps you know what to add per mile to your all-in rate in order to make up for the increase in fuel prices.

How it works: If an owner-operator sets their fuel price baseline at $2.50 after reviewing their cost of operations, but the average diesel fuel price increased to $5.25, you would enter…

$2.50 into the fuel price baseline field,
6 into the average miles per gallon field, and
$5.25 for the current average diesel fuel price (Find this by going to U.S. EIA’s website.)

The total per mile surcharge figure is $0.46 cpm.

Finally, add $0.46 per mile to whatever the base spot rate is in order to cover your extra fuel expenses.
Go deeper to know more about your cost of operations or watch our videos.

Small business owner-operators: JUST DO IT

How to implement a fuel surcharge

With the price of diesel fuel spiraling upward to record highs, if you have not incorporated a fuel surcharge into your operation, you must do it now. Small business owner-operators and motor carriers do not need to get government approval or file an application with DOT to implement a fuel surcharge. Here’s how to do it.

If you have regular customers

Notify your customers (this includes brokers, 3PLs, shippers, digital service providers) through emails or however you normally communicate. You can use this as a template:

Salutation (ABC Shipper)

As you are no doubt aware, fuel prices have spiraled upward in the last few days-weeks to some of their highest level in history. (John Q. Trucking Company) has acted in good faith to resist seeking price relief as long as we possibly could. Due to the critical nature of the current situation, we can no longer continue to absorb the increased cost.

Therefore, effective (insert date here), we must implement a temporary fuel surcharge on all shipments. The fuel surcharge will remain independent from our base rates and will be shown as a separate entry on our freight bill. The fuel surcharge amount will be charged on a mileage basis, reflecting the extra cost of the fuel used in the specific trip.

Our pricing is based on the U.S. Energy Information Administration Index (EIA) We will review this data and our actual costs on a weekly basis. The figure used for cost per gallon is also region specific, established by the average cost of the fuel per gallon, the date and the load’s origination point.

We deeply appreciate your understanding and partnership with us in helping to share the dilemma of these fuel cost increases. It’s working together that will keep our nation strong during this time of crisis. We hope that by sharing this burden together, we can keep the goods and services that power the American economy moving.

Respectfully,

John Q. Trucker

John Q Trucking Company

If you are entering into a rate agreement with a new customer (shipper, broker, 3Pl etc.)

Using the basics of the template above. You need to include in the contract pricing a flexible fuel surcharge. You need to indicate (in writing) that the rate you quote them is based on the present price of fuel at the time of signing the contract. Advise (in writing) that any increase in the price of fuel will be subject to an increase of __cent(s) per 4 (5) cent increase in fuel price as indicated by the U.S. Energy Information Administration Index (EIA).The figure used for cost per gallon is region specific, established by the average cost of the fuel per gallon, on the present date and the load’s origination point.

(end with)

Respectfully,

John Q. Trucker

John Q Trucking Company

If you are leased to a carrier or considering leasing to a carrier

If you are leased to a carrier or considering leasing to a carrier you need to find out what is their built in fuel surcharge and how much of the fuel surcharge does the leased on operator receive. Almost all large carriers will have some formula for a fuel surcharge but not all carriers pass that surcharge on to the owner-operator. Know what your lease contract has concerning a fuel surcharge and its distribution.

Fuel Cards

If you can qualify for a fuel discount card then get one. It is added protection from sudden increases in fuel prices. If you have a good fuel card savings and contract for a fuel surcharge based on the U.S. Energy Information Administration Index (EIA). You can protect yourself from sudden high fluctuations in pricing and potentially make more income, if you have accounted for your other cost of your operations. If you are a member of OOIDA you can contact OOIDA and ask to speak to someone about the OOIDA fuel card.