Fuel Surcharge Index
A fuel surcharge is one of the most common fees shippers will find on their freight bills — especially if they’re using LTL service. While it’s certainly not restricted to that particular mode, fuel surcharges are typically applied to LTL shipments to help offset the costs associated with transporting these goods. Take a look at why they’re applied, how they’re calculated, and get tips for reducing their impact.
Why do Trucking Companies have a Fuel Surcharge?
Because fuel is one of the most expensive components of trucking transportation, a fuel surcharge is applied to help cover operating costs. Even when national fuel prices dip, many industries — taxi services, airlines, delivery companies, etc. — need to continue charging fuel surcharges for two main reasons:
- Rates change frequently. Gas prices can change day to day, and fuel costs aren’t consistent throughout the country. The fuel surcharge helps balance these differences so shippers aren’t being charged too much and carriers aren’t charging too little.
- Diesel prices are usually higher. Even though gasoline prices may be low, that’s not always the case for diesel fuel. That’s why you may see a change in the index even when you’re paying less at the pump for gasoline.
How is it Calculated?
Each company uses its own formula for its surcharge, but most use fuel cost information provided by the U.S. Energy Information Administration (EIA) as part of the calculation. Many carriers also use distance and the truck’s average MPG to calculate the fuel surcharge and a threshold price to determine when to apply it. Another option is to calculate the surcharge as a percentage of the shipment’s total cost.
Because each company can use the same information in different ways — or different information altogether — it’s not possible to provide a universal formula. But no matter how the fuel surcharge is determined, shippers can take steps to help manage the costs.
Tips for Reducing the Impact of an LTL Fuel Surcharge
Since fuel surcharges are a normal part of the shipping environment, the easiest way to manage your overall cost is to look for inefficiencies in your supply chain and identify areas where fuel usage can be reduced. Here are some places to start:
- Consider alternate distribution models. Instead of having multiple LTL shipments traveling the same route, you can use pool distribution to consolidate shipments headed in the same direction. This reduces the shipment’s environmental impact and can significantly reduce the amount you’re charged for fuel.
- Think through your shipment timing. Taking steps to reduce empty backhauls and limit idling time at your locations can go a long way.
ArcBest Fuel Surcharge
The ArcBest® fuel surcharge is based on the U.S. National Average Diesel Fuel Index provided by the EIA and is adjusted on Wednesdays based on the Fuel Index reported the prior Monday. If the Fuel Index isn’t updated on Monday, we use Tuesday’s index to calculate the fuel surcharge level for that week. In the event the National Average Diesel Fuel Index is not updated by Tuesday, the previous week’s index will be used. For further explanation, see the ArcBest Rules and Special Service Charges Guide.
The fuel surcharge is shown as a separate entry on our freight bill and is applied to all line-haul charges, with applicable discounts, but not to special service charges.