How to Calculate a Fuel Surcharge
Over the past five years most trucking companies have implemented fuel surcharges. Today, with gas prices nearing $3.00 a gallon, small businesses in the transportation and delivery industries are starting to add fuel surcharges to ease pump pain. If you’re considering one for your business, this is how small trucking owner-operators and motor carriers assess their fuel charges. This information is sourced from the Owner-Operator Independent Drivers Association (OOIDA) and reprinted courtesy of Land Line Magazine.1. Calculating your own fuel surcharge:Base your fuel surcharge on the average retail price of diesel fuel for the region where you pick up a load on the day you load. This average retail price information is collected by the federal government's Energy Information Administration and updated every Monday unless affected by a federal holiday. Weeks that are affected by holidays are shown on the schedule at:http://tonto.eia.doe.gov/oog/info/gdu/schedule.html In those weeks, the survey is done on Tuesday, but the prices collected are still that Monday's pump prices.You can get the information by calling (202) 586-6966 or you can go to this Web site:http://tonto.eia.doe.gov/oog/info/wohdp/diesel_detail_report.aspFor an example for the week of 8/8/2005, if your diesel price is $2.484 per gallon in New England, your fuel surcharge per mile that week would have been $0.2784.These fuel surcharges are based on the average price of fuel in each region for the week indicated. Assumes your truck gets an average 5 miles per gallon, and that a fuel surcharge per gallon is the difference between the average fuel price in your region and $1.10 (standard industry benchmark price). 2. Calculate the per mile surcharge:Most companies begin imposing a fuel surcharge when the price of fuel goes above $1.10 per gallon. They assume that their basic freight rates cover their costs when fuel is $1.10 and lower. When the price goes higher than $1.10 per gallon they impose a fuel surcharge to recoup those higher costs.Here's a formula you can use to calculate your increased fuel costs and the amount of a fuel surcharge you should charge and collectFirst, gather these numbers:The total miles you'll drive, say, 1,000 miles.Your truck's average miles per gallon, say, 5 mpg.The average price of fuel for the day and the region where you pick up the load (check the EIA or OOIDA Web site), say $1.669 per gallon. (ed: obviously an old example!)3.) Now do the math:a) Figure your increased fuel costs per gallon used:Take the average price of fuel for the day and region where you pick up a load and subtract the benchmark fuel price: $1.669 - $1.10 = $0.569 the increased cost of fuel per gallon.b) Figure the number of gallons you used:A 1,000-mile trip divided by 5 miles per gallon = 200 gallons used.c) Multiply the total fuel surcharge:Gallons used, 200, multiplied by the fuel surcharge per gallon, $0.569, equals your increased fuel costs and the total fuel surcharge you should charge for the trip - $113.80NOTE: 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.