The bar goes up on fuel surcharges

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It’s not as easy to profit from a fuel surcharge as it used to be.It’s not as easy to profit from a fuel surcharge as it used to be.

Not too long after fuel surcharges became an established thing, people realized that an owner-operator whose truck and driving habits are fuel-efficient could make extra money.

Often based on a fleet’s average miles per gallon, surcharge formulas might assume that the operator averaged 6 miles per gallon, a common assumption for years. In such a scheme, an operator doing any better than 6 miles per gallon was getting a reimbursement for fuel higher than what he actually paid because his actual fuel costs were lower.

A lot has changed in 15 years: engines are more fuel-efficient, low-sulfur diesel yields better mileage, more trucks have aerodynamic features, and fuel prices have spiked high enough to spook any buyer into taking fuel costs seriously. Consequently, 6 miles per gallon isn’t the middle ground it used to be.

In this podcast, fleet compensation specialist Gordon Klemp explains that many surcharges are now tied closer to 7 mpg, and how owner-operators benefit or lose on surcharges when fuel prices are steadily dropping or rising. He also describes how typical surcharge formulas work.

If you want to skim through the seven and a half minutes, Klemp, head of the National Transportation Institute, follows the surcharge comments with:

  • Current levels of sign-on bonuses.
  • How demand for owner-operators has improved their pay.
  • How flatbed pay has advanced relative to dry van and reefer.
  • Why independents enjoyed strong earnings in 2014.

Read more about owner-operators’ record net income in 2014, based on the latest data released this week from financial services provider ATBS.