At $6.35 Diesel, a Rate Without an Indexed Fuel Surcharge Is a Pay Cut

Diesel hit $6.292 a gallon on average nationwide in the Energy Information Administration's Nov. 2 numbers. That's $2.539 more than a year earlier. In California it was $8.076. Even the cheapest region, the Lower Atlantic, was at $5.814 (EIA).

Those numbers aren't news to anyone who fueled up this week. What gets less attention is who ends up paying the difference. For a lot of owner-operators and small carriers, the honest answer is: they do.

What $2.54 a gallon means per mile

Here's our math, using round numbers. A tractor-trailer averaging 6.5 miles per gallon burns about 0.154 gallons per mile. At $2.539 more per gallon than last year, that's about 39.1 cents more per mile. Over 100,000 miles, roughly $39,000.

Your mpg will differ, and so will your lanes. But if your rate per mile, or your percentage of the linehaul, hasn't changed since diesel was under $4, then about 39 cents of every mile you're running now is coming out of your margin, not the shipper's.

The surcharge is supposed to fix this

Fuel surcharges exist for exactly this reason. A good one is simple: it starts from a base fuel price, and for every few cents the weekly EIA average rises above that base, the surcharge goes up by a set amount per mile. EIA publishes the national and regional diesel averages every week, so both sides can check the number (EIA).

The problem is that nothing requires one, and the ones that exist aren't always passed through.

What the rules require, and what they don't

If you're leased to a carrier, federal leasing rules give you some protection. Your lease has to clearly state what you're paid, and it has to "clearly specify the responsibility of each party with respect to the cost of fuel, fuel taxes, empty mileage" and other costs (49 CFR 376.12(d), (e)). Any charge-back has to be listed, along with how it's calculated, and you're entitled to the documents behind it (376.12(h)). If you're paid a percentage of revenue, the carrier has to show you the rated freight bill (376.12(g)).

That's a disclosure rule. It makes the carrier write down who pays for fuel. It doesn't say the person buying the fuel has to get the surcharge the shipper paid for it.

For carriers hauling brokered freight, the rate confirmation is the whole deal. Many rate cons quote one all-in number. When fuel jumps, an all-in rate that looked fine in the spring is a pay cut by fall, and there's no line on the paper to point to.

What we think should be standard

1. Every lease should include an indexed fuel surcharge. Base price, step size, cents per mile, and the EIA region it uses, all in writing.
2. Owner-operators who buy the fuel should get the whole surcharge. If the shipper is paying a surcharge on a load an owner-operator fuels, that money should go to the owner-operator, and the settlement sheet should show it.
3. Rate confirmations should break out fuel. An all-in rate hides the surcharge. Linehaul and fuel on separate lines lets a carrier see whether the rate actually moved with diesel.
4. Use the right region. A surcharge pegged to the national average shortchanges anyone running the West Coast, where diesel averaged $7.272 in the same data (EIA).

None of this needs a new federal rule. It needs carriers, brokers and shippers to write it down, and drivers to ask for it.

Before you take the next load or sign the next lease

• Find the fuel clause. If there isn't one, that's your answer.
• If there is one, check the base price. A surcharge that only starts paying above $5 a gallon covers a lot less than it sounds.
• Compare your settlement to the EIA weekly number for your region. If the surcharge didn't move when diesel did, ask why in writing.
• On brokered loads, ask for the fuel line separately. If the broker won't break it out, price your all-in rate off this week's diesel, not last spring's.

EIA updates the numbers every week. Your rate should be able to keep up.