Fair surcharge? Go figure

Fuel Surcharge as a percentage
Even when a fuel surcharge is figured as a percent of gross revenue, you can still convert it to a per-mile basis.

Suppose a 1,000-mile haul pays \$1,100. The surcharge is 18.9 percent of revenue. To convert the surcharge to per-mile, first get the dollar amount:

\$1,100 x .189 = \$208

Next, divide the miles into the surcharge in dollars. This will give you the surcharge on a per-mile basis:

\$208 divided by 1,000 = \$.208

Because fuel surcharge programs differ among carriers, determining the fairness of any given one can be more maddening than driving through Manhattan. Yet a leased operator can’t afford to remain in the dark about whether those pennies per mile outweigh the pain at the pump.

Since October, American Truck Business Services, which serves 30,000 owner-operators, has surveyed 22 carriers weekly about their surcharge programs. There is a common formula, notes Todd Amen of ATBS: That norm is to give a penny per mile for every 6 cents that the average diesel price is above \$1.25.

If you get that amount, and your truck gets 6 miles per gallon, you should break even, Amen says. If you get better fuel economy, you’re coming out ahead; if worse, you’re losing ground.

You start seeing apples and oranges, though, if you want to compare carriers using other numbers. In the Feb. 27 ATBS survey, the base diesel price ranged from \$1.00 to \$1.55. Increments were mostly 6 cents, but sometimes 5 cents and in one case 7.1 cents. Surcharges ranged from 18 cents to 29 cents.

While data from only 22 carriers isn’t enough to make firm conclusions about averages, the report does show that two aspects appear to have no bearing on surcharges: carrier size and whether the surcharge applies for all miles or only loaded miles.

“You would expect to see guys that pay all miles with the lower fuel surcharge, but that’s not necessarily the case,” Amen says. “If you consider that deadhead amounts to about 10 percent of the miles you run, if you’re trying to compare carriers and you’re in the 20 cpm surcharge range, getting 22 cents for loaded would be comparable to 20 cents for all miles.”

In the next year or two, the industry will assume that high diesel prices are a fact of life, Amen predicts. The surcharge base price will be bumped to \$1.50 or more, and base pay rates will increase 3 or 4 cents to compensate. Learn now how your surcharge works and meshes with your operational costs, so when things change you’ll have no trouble staying on top of your game.

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