As fuel prices surge, trucking operations need to adjust
As of Tuesday, March 24, fuel prices averaged higher than $5 per gallon in many regions and were nearing $7 on the West Coast.
On March 11, the International Energy Agency announced the largest oil release since 1974, while the U.S. released 172 million barrels from its strategic petroleum reserve.
Analysts expect global energy markets to remain volatile as the U.S.-Iran conflict and the closure of the Strait of Hormuz continue.
Fuel prices are updated daily on this Land Line resources page.
Fuel is the highest variable cost for trucking operations, and even a small change can have significant results.
OOIDA recommends that truck drivers keep a fuel ledger. Fine-tuning every cost in your trucking operation can make a big difference in profitability.
The Association even offers a fuel surcharge calculator on its website.
There’s no rule, law or regulation mandating a fuel surcharge, but small carriers with direct shipper freight contracts must incorporate one.
“Good carriers will typically pass through 100% of the surcharge to their leased-on owner-operators,” OOIDA said. “This allows the leased owner-operator to offset the higher price of diesel.”
It’s critical that carriers ensure their lease agreement includes a 100% pass-through.
Carriers typically increase their surcharge by 1 cent for every 6-cent increase above their established baseline.
How to calculate: current fuel price – price baseline ÷ average miles per gallon
Implementing a surcharge is particularly important for trucking operations with regular customers, those entering into a rate agreement with a new customer, or anyone leased to a carrier or considering leasing to one.
Fuel cards also offer protection against sudden price increases.
OOIDA reminds drivers that a fuel surcharge isn’t meant to cover the full cost of fuel, but to help offset higher diesel prices.
Most owner-operators, operating under their own authority, operate in the spot market, using brokers to secure freight.
Brokers typically don’t pay a fuel surcharge, so owner-operators should incorporate it into their all-inclusive rate negotiations. LL