Fuel Pricing Structure

The price of diesel is a major component in the freight cost. At times fuel is the largest single expense that a carrier must consider. Having said that, we engaged our customers in a discussion (see resuls below) to come up with a way to handle this challenge. We have implemented a fuel program that accurately reflects the cost of fuel and does not change every week so pricing to the end customer can remain somewhat stable.

When the customer receives a quote from us, the price will include the fuel price at the time rounded to the nearest quarter. The price of the fuel will be noted on the quote. This fuel price is based on the US Department of Energy's weekly retail survey of diesel prices and posted every Monday on the following website: DOE Diesel Prices.

Also included will be a number in which the price will change for every $.25 cent change in the fuel. This number is based on a calculation of the number of miles and the fuel consumption.

When you put this all together you will get a base rate and if the fuel stays within a +/- 24 cent interval of the set fuel price the freight rate will not change. If fuel rises to the next $.25 cent interval the freight charge will rise by a set amount. If the fuel decreases by $.25 the freight charge will decrease by the same set amount.

After presenting this model to our customers we have received many positive statements on how easy it is to implement in their business practices. Call us if you would like more information on how we can make your freight rates more stable.


Customer discussion Points

The following are points that were considered when creating our fuel surcharge program

- 85% of respondants felt that fuel surcharges were confusing and hard to confirm if they were indeed being charged correctly.
- Respondants who used carriers charging fuel surcharges by percentage could not make any sense why prices were being changed and when.
- Fuel surcharges by the mile or kilometer requires too much work to calcuate and there are too many different mileage programs used in the industry.
- Price changes in freight was a great concern because they have to pass on their costs to their customers.
- Customers wanted to reveiew or audit the fuel charge to ensure proper billing and needed some clarity on how it was calculated
- Purchasing managers could not issue PO's properly because the freight costs changed since their PO was issued. This caused issues at times during reconciliation.
- Respondants wanted to lock in prices for a longer period of time so that they can show consistancy in their pricing to their customers.
- A fuel program is the best way to 'protect' the shipper's and the carrier's interest in providing the best freight rates.
- Shippers with light freight wanted a way to be rewarded for a better fuel economy.


We want to thank all the respondants for their time and we are glad to have improved our fuel program for you.