Current National Fuel Surcharge Rate

     The current national fuel surcharge rates for various truck and package shipping methods, effective January 25, 2012 are listed below:

    The current national fuel surcharge rate is based upon $3.848 price per gallon for diesel fuel (01/23/2012) according to the Energy Information Administration National U.S. Average On Highway Diesel Fuel Prices.  The EIA is a division of the Department of Energy and publishes the official energy statistics from the US Government including weekly average national gasoline and diesel prices as well as regional fuel rates.

    Legally each freight carrier is free to set their own fuel surcharge rate.  Most carriers choose to base the fuel surcharge rate upon the current U.S. National Average Diesel Fuel Index price of diesel fuel combined with their own different method for computing freight costs.  There are differences in how freight companies compute their respective fuel surcharge rates as some carriers may use the current week's average diesel price while other carriers may use an average from a prior week, prior month or even prior quarter of the year.  In addition there are difference in computing the fuel surcharge rates between various segments of the freight industry:

    The long haul (truck load) diesel fuel surcharge rate is strictly based upon miles of service, which is consistent with the method of computation of freight charges.  Truck Load diesel fuel surcharge rates are typically reset each week based upon the EIA reports released on Monday of each week.  The date that each carrier resets their fuel surcharge rates may vary, and some carriers use the prior week's average diesel fuel price to determine their own fuel surcharge rate.  Please note, some carriers may used a regional price of diesel fuel, while other carriers will use the national average price of diesel fuel.  The California fuel surcharge is higher than the national average due to the higher fuel costs in California related cleaner burning fuels needed to meet the California air pollution regulations.  The California fuel surcharge rate will be used whenever shipments originate or terminate in California.  Generally speaking, long haul (truck load) fuel surcharges are increased by 1 cent per mile for each 5 cent increase in the average cost of diesel fuel.  The justification behind this pricing method is that the average long haul truck is able to achieve approximately 5 miles per gallon of diesel, thus each 5 cent increase in the cost of diesel fuel would cost the trucking company approximately 1 cent in additional operating costs per mile of operation.

     As LTL (less than truck load) and small package carriers charge their freight fees based upon the weight of the goods, distance traveled and other factors, it is logical to compute the fuel surcharge rate as a percentage of the freight costs rather than a flat mileage rate.  LTL (less than truck load) companies typically reset their fuel surcharge rate each week based upon the EIA reports released on Monday of that week.  The date that each carrier resets their rates may vary, and some carriers use the prior week's average fuel cost to determine their own fuel surcharge rate.

     The UPS Fuel Surcharge Rates listed above are effective January 03, 2012 are based upon the National U.S. Average On Highway Diesel Fuel Prices reported by the U.S. Department of Energy for the month that is two months prior to the current month.  UPS fuel surcharge rates effective February 06, 2012 will increase/decrease to x.xx% for ground and will increase/decrease to xx.xx% for air.

     Please note: Some carriers have started to reset their freight rates to include more of the fuel surcharge into their basic freight rates.  This means the carrier's published fuel surcharge rate will be lower than the rates published above, but their basic freight charges will be higher than other carriers.  Always compare both values when evaluating the cost of shipping via different freight companies.

Recent Fuel Surcharge Rates

The EIA chart shows the 30 month trend in diesel fuel prices.

Historical Fuel Surcharge Rates

     During 2007 the fuel surcharge rate for LTL shipments ranged from 15.0% to 25.3%.  The fuel surcharge rate for LTL shipments started 2008 at 24.3%, rose to 38.5% on July 16th and then decreased to 14.1% at years end. From the start of 2009 the fuel surcharge rate continue to decline until mid-March at which point the fuel surcharge was at the lowest point during the past 2+ years.  Since mid-March 2009 the fuel surcharge has steadily increased with small (sharp) peaks every few weeks.

    The Historical Diesel Price chart (courtesy of EIA) shown above includes the sharp run up to the 2008 peak diesel prices as well as the corresponding sharp decrease to the lowest price of diesel fuel in recent history during the Spring of 2009.

Origins of the Fuel Surcharge

     Customers have often asked: "what is this fuel surcharge" or "how much is the fuel surcharge and why is it important"? For these questions and whole lot more, please continue reading.

     The simplest answer is posted at your local gasoline service station.  Gas prices are high this week, drop next week and the follow week will rebound and more.  Diesel prices are just as volatile as Gasoline prices.

    To accommodate the volatile fuel prices, several long haul truck load freight companies added a fuel surcharge to freight charges during the gas crisis of the 70's rather than changing freight rates.  Adding a variable surcharge instead of raising the freight rates across the board would give these freight carriers a competitive advantage during periods when fuel prices declined and would be fairest pricing system for their frequent customers.  During the mid '90's the fuel surcharge would become common place across the entire long haul industry and would standardized based upon $1.00 per gallon for diesel and the fuel economy of various freight trucks.

    Since long haul truckers are directly affected by fuel costs the addition of a fuel surcharge seems quite logical.

    Before long all segments of the trucking industry, including small package carriers, would add a fuel surcharge to their freight charges. As rising fuel costs affected manufacturing industries, the fuel surcharge has become common place outside of the transportation industries.

Why Should Customers Care?

    The simple answer to the question is because the fuel surcharge effects the cost of goods sold to the consumer.  In some cases the fuel surcharge can have a dramatic effect.

    A 2000 lb shipment of 10 decent sized slabrollers or pottery wheels shipped cross country may cost $1000 for the freight charges.... before the nasty fuel surcharge adds $385.00 (based upon 2008 peak fuel surcharge rates) to the freight charges.  In this example of 10 slabrollers, the basic freight charge adds $100 to the selling price of the product while the fuel surcharge adds another $38 to the selling price.  And the fuel surcharge continues to increase and decrease at a moments notice. A nickel here a dime there, the fuel surcharge eats away at the profit of products or causes regular increases in the selling price of products.

     Then there is the matter of slips and clays.  A truckload of slip or clay traveling 1465 miles from the Seeley's plant in Upstate New York to Gulfport Mississippi has $1172 fuel surcharge added to the freight rate (based upon the 2008 peak fuel surcharge rates) whether the truck is the truck is half empty or completely full. Obviously completely full has less impact on the selling price of the products shipped on the truck than half empty.

     Anything WE can do about Fuel Surcharges?

     There are several things that WE (you and us, the collective WE) can about rising fuel surcharges.

     Of course we all can economize, drive fewer miles and maintain our vehicles to reduce the demand on fuel.  More importantly WE can economize in the business.  The 2000 lb shipment previously mentioned is a good example.  The freight is $1000.  When the shipment size is doubled to 4000 lbs the freight increases by only $500. Increasing the shipment to 5000 lbs from 4000 lbs and the freight increases by $50 more.  The fuel surcharge remains the same percentage but the basic freight rate per pound goes down as the order size increases.  Economizing in the business becomes a customer service issue as we (Dogwood) decide to whether to make smaller (more costly to ship) purchases versus larger, more economical to ship purchases?

     Planning truck loads of slips and clays are just as important.  39,000 lbs of clay is ready to leave the factory. There is room on the truck for an additional 5,000 lbs but that product will not be ready for one business day.  Do we release the truck without the extra product?  Do we hold the truck waiting for the additional product?  Or do we pack the truck with other products (which may or may not be needed at this time) just to maximize the load?  The answer to these questions becomes a customer service issue.  It also becomes a cost issue.  What if that delay was 10 business days?

     We are asking ourselves these same questions across every product division that we sell.  There are no easy answers.  The ceramic mold industry is being dramatically impacted by these issues.  Dogwood Ceramic Supply places a 2000 lb order with a ceramic mold company on the first of the month, the manufacturer ships on the 15th and on the 16th Dogwood places a 3000 lb order.  Just think of the money that could have saved if those orders were combined together!   At the same time think of the declining level of customer service had those orders been combined together and the extra molds took two or three additional weeks to complete.  As it has been said there are no easy answers.

     These freight issues important on the inbound side of Dogwood Ceramic Supply, they are even more important on the outbound side of the business.  In early February (2008) Dogwood Ceramic Supply held a 500 lb order that was to be shipped motor freight (LTL) to a key customer.  Gasp, horrible, how cruel.  However, during the following week Dogwood received a rather large mold order, 6000 lbs of which was for that same customer.  We saved the customer $125 in freight charges by combining the two shipments into one.  Thinking ahead can be very important.  We can't avoid the fuel surcharge, but we can ship smart so as to avoid wasting our shipping dollars.

Is the Fuel Surcharge a legitimate charge?

     One can easily argue that the Fuel Surcharge is definitely a legitimate charge for the long haul trucking industry as operating costs are directly related to the price of diesel fuel and the alternative of adjusting prices every week is not possible as the industry often quotes binding freight rates for weeks, months or even years in advance.  It has been often proposed that the long haul trucking industry (as well as rail and other bulk transportation industries) raise their standard service rates to eliminate much of the fuel surcharge as the cost of fuel would be incorporated into the standard freight rates. In theory such a price adjustment seems valid, but how much of a price increase should be applied, especially considering the volatility of fuel over the past two or three years?  Remember, if fuel prices were to drop significantly then the consumer would be grossly overpaying with regards to the standard service rates.  Nobody likes to overpay.

    Outside of the long haul trucking industry, the idea of a fuel surcharge is less eagerly supported.  LTL and small package carriers may incur significant fuel costs, but these industries are as much a service industry (labor) as a freight industry (transportation).  All too often it first appears that these LTL and small package carriers are just piling on a fee for the sole purpose of generating profits.  Kind of like free money.  And while a portion of fuel surcharge could be deemed excessive, at least some of the fuel surcharge must be considered appropriate because the carriers do require fuel to operate their vehicles.  At issue is what rate of fuel surcharge is reasonable?  If one just evaluates the 2007 fuel surcharge rates for LTL freight companies, at one point in 2008 the price of diesel increased by enough cold hard dollars (actually about $1.01 per gallon or an increase of 41% over the lowest diesel fuel price of the year) to increase the fuel surcharge by 10 additional percentage points.  Is a 10% increase in the freight rates due to diesel prices increasing 41% fair or appropriate?  Maybe, maybe not.  Some of that charge must be considered appropriate.  But, because the fuel surcharge for LTL freight companies is computed as a percentage of the basic service charges, the smaller shippers (because of their traditionally lower volume and smaller discounts) will pay a larger dollar amount in fuel surcharges than the larger shipping companies (with higher volume and larger discounts) for the same identical shipments.  Therefore, how much fuel surcharge for LTL trucking is appropriate will continue to be a subject of great debate.

     For Small Package Shipping Companies, the largest portion of their standard service rates is actually for delivering the package from the door of the delivery truck to the door of the customer.  The Small Package Shipping companies claim their fuel surcharge is applicable to the freight hauling services rather than the delivery service itself.  Seems logical.  Except, if memory serves me correctly, at one historical point the fuel surcharge for the Small Package Shipping Companies was exactly 0.25%.  One penny on the typical 1 pound package costing $5 to ship from Point A to Point B.  Today, the fuel surcharge amounts to $0.17 for that same 1 pound package. Annual revenue in the billions of US Dollars and the company is chasing down every last penny?  Even if the charge is appropriate (and there is no doubt fuel costs are significant) does the company really need to chase down every last penny through a surcharge?  How about raising standard (published) service rates by 5 cents across the board and calling it even?

     It is the appearance of chasing pennies for the purpose of generating revenue that raises the greatest consumer objections.  Our suggestion would be to increase the standard service rates such that the insignificantly small fuel surcharge could be avoided all together.

     More importantly, as we are debating the fuel surcharge of the freight industry, other industries have undertaken their own aggressive fuel surcharge programs.  Sometimes, once in a blue moon, the fuel surcharge is quite logical and very appropriate (especially during 2008 when fuel prices were extremely volatile).  However, most of the time it appears to be simply a revenue generating device OR a means of advertising a low product price only to gouge on service or accessorial charges.  Not exactly fair.

     There are no simple answers to the original question.

© 2008, 2009, 2010, 2011 Dogwood Ceramic Supply

Disclaimer:
     For Dogwood Ceramic Supply's customers the fuel surcharge has become a significant issue due to the volatility of the fuel surcharge rate.  Dogwood Ceramic Supply provides the information on this page as a tool to assist our customers with their questions concerning freight costs. This webpage is updated on Wednesday of each week to reflect changes in the published surcharges.  There are no guarantees regarding the content, information and fuel surcharge rates published on this page as Dogwood Ceramic Supply does not set, adjust or regulate the Fuel Surcharge Rate.  Rates and surcharges published herein are based upon Governmental and various Freight Company's published data.  Rates and surcharges published on this page may not reflect the rates and surcharges charged by any specific Freight Company to any specific customer.  All other information contained within is the opinion of Dogwood Ceramic Supply.

     For additional information about freight and freight costs please refer to Dogwood Ceramic Supply's UPS and Motor Freight web pages.

12590 Dedeaux Road
Gulfport Mississippi, 39503
Telephone (228) 831-4848        Fax (228) 831-3111

Showroom Business Hours:

Monday, Tuesday, Friday and Saturday 10AM to 5PM
Thursday 1PM to 6PM

Closed Wednesday and Sunday

    The current national fuel surcharge, history of the fuel surcharge and the impact of the current fuel surcharge on products sold by Dogwood Ceramic Supply.