Carriers charge Fuel Surcharge to shippers to account for the fluctuating fuel cost. It is designed to protect the carrier against increases in fuel prices during transport. It is calculated as a percentage of the base rate and is usually added to a shipper's freight bill to cover the cost of operations. Both ground and air shipping services can have fuel surcharges. Without this surcharge, fuel prices would significantly impact a carrier's profit margins during times when diesel prices go up. These charges are not intended to fully cover fuel costs. Instead, carriers aim to make price increases more manageable.
Fuel prices can be highly volatile, often fluctuating due to various global factors. By applying a Fuel Surcharge that varies depending on current fuel prices, carriers can stabilize their pricing model without the need to constantly alter their base rates.
Carriers calculate the surcharge percentages based on the U.S. Gulf Coast (USGC) spot price for a gallon of kerosene-type jet fuel (for air shipments) and on the U.S. On-Highway Diesel Fuel price (for ground shipments). Companies and groups such as U.S. Energy Information Administration frequently publishes a table that relates spot prices to specific surcharge percentages, allowing customers to anticipate the surcharge based on current fuel prices.
To learn more about how the carriers apply the Fuel Surcharge, here are articles from the carrier sites: