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Fuel surcharge, explained properly

The surcharge exists so that a diesel spike does not destroy a rate agreed months earlier. Knowing how it is computed tells you whether an all-in rate is good.

A tractor-trailer on the highway at golden hour

Rates and negotiationBy BSG Carriers·Published ·3 min read

What it is for

Diesel moves independently of freight rates and it moves fast. A rate agreed in January cannot anticipate what fuel costs in June, so the industry separates the two: a linehaul rate for the transport, and a fuel surcharge that floats with the diesel price.

That separation protects both sides. The shipper is not paying a padded rate that assumes the worst, and the carrier is not eating a spike they could not have priced. It only works if the surcharge actually tracks fuel, which is what makes the calculation worth understanding.

How it is normally calculated

Most surcharge schedules work the same way, whatever the numbers in them.

  • A reference diesel price is taken from a published index — most commonly the U.S. Energy Information Administration’s weekly national average, or a regional one.
  • A baseline price is set, below which no surcharge is paid. Historically this sat somewhere around $1.20 to $1.25 a gallon, though schedules vary widely.
  • An assumed fuel economy is agreed, usually around 6 miles per gallon.
  • Surcharge per mile = (current price minus baseline) divided by the assumed mpg.
  • Worked example: diesel at $3.90, baseline $1.25, 6 mpg. ($3.90 - $1.25) / 6 = about $0.44 per mile.
  • The assumed mpg is the part worth noticing. If the schedule assumes 6 and your truck does 7, the surcharge over-covers you slightly; if you do 5.5, it under-covers.

Why "all-in" changes the conversation

Many broker loads are quoted all-in: a single number including the surcharge. That is not a trick, but it does make comparison harder, because an all-in rate and a linehaul-plus-FSC rate are not the same shape of number.

Convert before you compare. If you are offered $2.60 all-in, and a comparable load is $2.20 linehaul plus a surcharge that works out at $0.44, the second is worth slightly more per mile. Doing that conversion in your head is a habit worth building.

The other thing to confirm is whether the surcharge is paid on loaded miles only or on all miles. Loaded miles only is the norm, and it means your deadhead fuel is coming out of the linehaul.

Checking whether the one you are offered is fair

01
Find the index and the week
Ask which index the schedule uses and which week it reads from. A schedule quietly running a week behind a rising market is costing you.
02
Check the assumed mpg
Six is standard. A schedule assuming seven or eight pays you less per mile for the same diesel price.
03
Check the baseline
A higher baseline means a smaller surcharge. This is the number most often adjusted in the shipper’s favour.
04
Then judge the total against your own cost per mile
Linehaul plus surcharge is the only figure that matters at the end, and it has to clear your break-even.
FAQ

Common questions

No. It is a commercial convention, not a regulation, and there is no mandated formula. Everything about it — index, baseline, assumed mpg — is negotiated between the parties.
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