In 2012, fuel surcharges will need to be analyzed in a way that we haven’t seen since the 1980s. With some 25 to 30 percent of shippers’ total trucking costs tied to surcharges, this is an area that can no longer be ignored. Since surcharges were introduced in the 1980s, shippers have taken on virtually 100 percent of the risk associated with price volatility, but have no ability to control these costs.
Over recent years, truckload carriers have significantly improved performance, in some cases achieving 7 miles per gallon or greater directly reducing their operating costs. Shippers, however, have seen little reduction in surcharges resulting from these efficiency improvements. Fuel surcharges also mask the fact that larger carriers negotiate substantial retail fuel volume discounts. The question becomes, are surcharges actually a pass-through cost? Or an extra profit center for carriers?
Progressive shippers have started to ask carriers to use actual mpg performance to calculate surcharges and carriers have typically responded with an increased base rate. With increasing fuel prices, shippers can’t afford to lose millions of dollars by relying on an archaic index-based system and outdated mpg baselines to set costs for a volatile commodity like diesel fuel.
Carriers and shippers must come to an agreement on how to handle the variable costs of fuel and share efficiency improvements. With a growing focus on alternative fuels like natural gas, the industry is beginning to see lower cost options that compete with traditional diesel-based transportation. Changes are not going to happen overnight, but it’s time for shippers to push for a fair share of efficiency improvements and develop plans for future energy alternatives.