Fuel Surcharges Explained

Google your question and there are numerous articles that can help explain it. My quick and easy answer is that it one reason it was originally intended for was to keep carriers and shippers from having to re-negotiate contracted freight rates every time fuel goes up. It is a sliding scale based on dept of energy’s published fuel costs. It goes up and down based on the cost of fuel. Generally based on a starting point of $1.25 per gallon, but that also is subject to what the shipper and carrier agree on.
My carrier has different fuel surcharge methods for each shipper we haul for. Some it is a per mile per unit hauled, some it is a percentage of the freight bill and others it is a flat rate per unit hauled.
The trucks that get really good fuel mileage actually make more net profit the higher fuel goes since the surcharge is based on mpg.

 

Fuel Surcharge is not based off of anything. It is a negotiated rate in a freight contract. Any methodology that the 2 parties agree on can be used.

That said, the most common formulas use the DOE price index as a basis for determining the fuel price for the formula. Beyond that every other factor can vary depending on the contract ...the base rate for fuel cost, the MPG, the date the FSC changes and to the level of adjustment - round up, round down, whole cents, fraction of cents, nearest nickel.

The main thing people need to understand is the FSC is not a government mandated rate ... it can be anything.