History of Fuel Surcharges

Fuel Surcharges. What are they? Why and when did they start?  Who decides the price?

It all started back in 1973 as a result of the Arab oil embargo and the Organization of the Petroleum Exporting Countries (OPEC) Oil Crisis. The Department of Energy (DOE) began computing a National Retail Diesel Average in order to compensate transportation carriers for the fluctuation of fuel prices created by the OPEC oil crisis.

For a couple of decade afterwards, Fuel Surcharges were actually removed but returned to LTL carriers rates in the mid 90’s, when diesel fuel prices drastically rose to $1.15 a gallon.  When the fuel prices rose again, a group of retail diesel representatives was formed. This group reports diesel rates to the DOE on a weekly basis.  The DOE takes those figures to compute a weekly National Average diesel price.

How LTL carriers decide how fuel charges are priced varies from company to company.  Fuel surcharge schedules are based off of the National Average of diesel for the week.  Some LTL Carriers may use a regional fuel average to base their schedules off because their freight is hauled in a particular region. National carriers will base their schedules off a national average. Another method that some of LTL carriers have adopted is based on the daily fuel prices along a certain route that allows them to compute more accurate average, as it is updated every 24 hours.

Every Major LTL carrier has a fuel surcharges on their invoices. These will vary from week to week on an LTL shipment. While Fuel surcharges were a topic of discussion in the past when fuel prices where high in 2013 and 2014, we don’t see this so much now.  However, with fuel prices creeping up in 2016 it all comes down to the bottom line – so if you’re looking to reduce your freight cost give PNGLC a call at 717-626-1107×3 or email sales@pnglc.com and let us help you.