 There are several sides to the Fuel Surcharge Issue
 It can help offset your peak fuel prices
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To get surcharge from shippers, four things have to take place. First, surcharge must be calculated accurately by the carrier / broker. Next it must be explained and agreed to by the shipper. Third, it must be properly billed to the shipper. And finally the shipper should pay it.
There can be problems with each step due to a variety of reasons.
We find many cases, especially with smaller fleets and some brokers, where a surcharge was not even calculated because it is not understood. Billing issues come about from not having asked for surcharge, being told to not even try to bill it, being told it is already in the rate and being told that their “system” can’t handle it. Even when it is billed, some shippers do not pay it.
As a business, you need to know how you should have assessed the surcharge so that you can then do whatever else you need to do to offset higher fuel prices. Calculating surcharge is actually a pretty simple process. The examples below are based on historical data and calculations that are widely used throughout the surface transportation industry.
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We first take the average pump price (i.e. national prices) when the shipment was hauled and compare it to the baseline from which surcharge is calculated. The baseline that many in the industry have historically used is around $2.26 to $2.59 per gallon, depending on the company, region, etc. Note: This price per gallon also happens to coincide with the base target price set for crude oil by OPEC.
To calculate it you divide the pump price by your fuel mileage in miles per gallon (MPG) to come up with a cost per mile (CPM). If we use a baseline fuel cost of $2.26 per gallon and you are using 5 MPG as your fuel mileage calculator, your BASELINE is $0.45 per mile.

You then take the fuel cost per gallon average from when the shipment was transported and do the same calculation. Surcharge is the difference between this CPM and the baseline CPM.
Another simple way to calculate it with the same result is to just subtract the baseline cost ($0.41 per gallon) from the national average price, then divide it by the fuel mileage in miles per gallon and get the cost per mile (CPM). You will come up with some numbers that will show something similar to the following table.
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COST PER MILE (CPM) VERSUS PUMP PRICE MINUS BASELINE
- $2.26 per gallon fuel at 5 MPG is $0.45 CPM = $0.04 CPM surcharge
- $2.46 per gallon fuel at 5 MPG is $0.49 CPM = $0.08 CPM surcharge
- $2.66 per gallon fuel at 5 MPG is $0.53 CPM = $0.12 CPM surcharge
- $3.06 per gallon fuel at 5 MPG is $0.61 CPM = $0.20 CPM surcharge
- $3.26 per gallon fuel at 5 MPG is $0.65 CPM = $0.24 CPM surcharge
- $3.46 per gallon fuel at 5 MPG is $0.69 CPM = $0.28 CPM surcharge
- $3.66 per gallon fuel at 5 MPG is $0.73 CPM = $0.32 CPM surcharge
- $3.86 per gallon fuel at 5 MPG is $0.77 CPM = $0.36 CPM surcharge
- $4.06 per gallon fuel at 5 MPG is $0.81 CPM = $0.40 CPM surcharge
- $4.26 per gallon fuel at 5 MPG is $0.85 CPM = $0.44 CPM surcharge
- $4.46 per gallon fuel at 5 MPG is $0.89 CPM = $0.48 CPM surcharge
- $4.66 per gallon fuel at 5 MPG is $0.93 CPM = $0.52 CPM surcharge
- $4.86 per gallon fuel at 5 MPG is $0.97 CPM = $0.56 CPM surcharge
- $5.06 per gallon fuel at 5 MPG is $1.01 CPM = $0.60 CPM surcharge
- $5.26 per gallon fuel at 5 MPG is $1.04 CPM = $0.64 CPM surcharge
- $5.46 per gallon fuel at 5 MPG is $1.08 CPM = $0.68 CPM surcharge
- $5.66 per gallon fuel at 5 MPG is $1.12 CPM = $0.72 CPM surcharge
- $5.86 per gallon fuel at 5 MPG is $1.16 CPM = $0.76 CPM surcharge
GOOD RULE OF THUMB – “$0.05 PER GALLON IS $0.01 PER MILE.”
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Another popular matrix used by many in the transportation industry to calculate for fuel a surcharge is based on pump price ranges and assigned flat percentages of a particular job.
Example: A shipment that billed out $25.00 and that week’s pump price for fuel is $3.66 per gallon. Using the chart below you would apply a 15.50% FSC to the base charge of $25.00 X
15.50% = $3.88 FSC

1. Fuel Cost per Gallon will be determined by a survey of gasoline stations by the
Energy Information Administration ( www.eia.doe.gov
). For purposes of determining the cost per gallon, the data is typically separated by region, area, using the requisite fuel type.
2. Shipper negotiates with the Contractor/Broker a temporary fuel surcharge due to sudden increases in fuel cost beyond the Contractor’s control. The temporary fuel surcharge will be assessed weekly based on the matrix below.
FUEL COST PER GALLON
$2.26 - 2.59 (baseline)
$2.60 - 2.74
$2.75 - 2.87
$2.88 - 3.00
$3.01 - 3.13
$3.14 - 3.26
$3.27 - 3.37
$3.38-3.55
$3.56-3.85
$3.86-4.15
$4.16-4.45
$4.46-4.75
$4.76-5.05
$5.06-5.35
$5.36-5.65
$5.66-5.95
$5.96-6.25
$6.26-6.55
SURCHARGE
N/A
2.25%
4.50%
6.75%
7.25%
9.00%
11.50%
13.75%
15.50%
17.00%
19.00%
21.50%
24.00%
26.00%
28.00%
30.00%
32.00%
35.00%

Regardless of what method you chose to calculate FSC this then is what gets billed to the shipper, which then was transferred to the party purchasing the fuel.
In general, you will receive less than that when you cost it against total miles, as deadhead is not usually paid unless it is negotiated into the rates. Also most calculate it using national average prices, which will vary by region, location, etc.
If you are leased to a fleet or have an agreement through another major entity, you not only should try and take advantage of their ability to negotiate a more just surcharge, but also you can take advantage of their fuel purchase programs in some cases.
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Even with surcharges starting to kick in at $2.26 per mile (with our 5 MPG calculation), those who aren’t able to get close to 5 MPG and get surcharge properly negotiated / billed / collected have taken a hit in profitability for every mile they then drive. This is why surcharge is so important.
If you are unable to recover the entire amount of the increased cost, there are several other ways to offset fuel costs through equipment operations. They are cranking up the miles (utilization), shopping for lower fuel prices (deals) and improving fuel mileage and slowing down, etc.
When we look at miles, fleets and companies who realize just 100 more miles per week (20 miles per day), put over $0.01 per mile to offset the increase in costs.
For a contractor, that same 100 miles per week still puts almost $0.01 per mile more to the bottom line.
We can use the rule that $0.01 per mile = $0.05 per gallon, BUT miles do even more when offsetting fuel costs. It doubles the effect when looking at actual dollar income.
Therefore, 100 more mile per week offsets about $0.10 per gallon in fuel price in actual dollars.
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* Rule of Thumb 1: $0.05 per gallon = $0.01 per mile
NOTE: Good rule for both shopping fuel price and calculating fuel surcharge.

* Rule of Thumb 2: 5 MPH changes fuel mileage 0.5 MPG or $0.02 per mile at $1.00 per gallon
– BUT $0.10 per mile at $5.00 per gallon.
* Rule of Thumb 3: 10 hours idling per day costs about $0.02 per mile. This also offsets the same as rule 2.
NOTE: Slowdown 10 MPH and minimize idling and you can offset up to $0.25 per mile.
* Rule of Thumb 4: 100 miles per week affects bottom line profitability about $0.01 per mile.
* Rule of Thumb 5: Just 50 miles per week offsets about $0.05 per gallon pump price in actual
“dollar income.” This is because you get the effects of Rules 1 & 4 multiplied by 50 more miles.
SUMMARIZING: Using these rules, one can offset up to $0.50 per gallon change in pump price through operations – without surcharge.