{"id":13865,"date":"2022-02-22T05:55:21","date_gmt":"2022-02-22T13:55:21","guid":{"rendered":"https:\/\/michaeljbrumm.com\/dcl-v3\/?p=13865"},"modified":"2023-11-30T11:21:43","modified_gmt":"2023-11-30T19:21:43","slug":"how-to-calculate-fuel-charges","status":"publish","type":"post","link":"https:\/\/michaeljbrumm.com\/dcl-v3\/blog\/shipping\/how-to-calculate-fuel-charges\/","title":{"rendered":"Know Your Freight Costs: How to Calculate Fuel Charges"},"content":{"rendered":"

Fuel can be a costly part of shipping and transportation. Because the market value of fuel fluctuates frequently, shipping companies change their fuel rates to match the market rate. That means the fuel charge you see on your shipping invoice is rarely a fixed fee or flat rate.\u00a0<\/span>\u00a0<\/span><\/p>\n

Shipping companies have also started adding fuel surcharges on top of their base rate, which can apply to some shipping services but not others.\u00a0<\/span>\u00a0<\/span><\/p>\n

What many ecommerce companies may not know is that their fuel costs are often negotiable.<\/span><\/p>\n

Understanding how your carrier calculates their fuel rates and surcharges, is the first step in knowing if you’re overspending on this part of your overall transportation costs. Here is an overview of fuel charges and surcharges, how they are calculated, and how they affect various shipping services.\u00a0<\/span>\u00a0<\/span><\/p>\n

What are Fuel Surcharges and How are They Calculated?<\/span><\/b>\u00a0<\/span><\/p>\n

Shipping carriers charge for fuel as a separate cost than their shipping services. But it\u2019s not a single rate, there are many factors that go into the fuel cost you see as a line item on your shipping invoice.<\/span>\u00a0<\/span><\/p>\n

Here are the main factors that go into the final fuel cost on your invoice, and how it is calculated:\u00a0\u00a0<\/span>\u00a0<\/span><\/p>\n

1 The Cost of Fuel\u00a0<\/span><\/i>\u00a0<\/span><\/p>\n

Carriers determine a fuel rate based on the average industry prices or the market cost of fuel. This is so that they don\u2019t lose money on shipments when the cost of fuel goes up and they might even profit if the cost of fuel dips.<\/span>\u00a0<\/span><\/p>\n

Each carrier uses a slightly different method to calculate their base fuel rate. It\u2019s important to understand the differences so you can find the carrier that best matches your needs and not get locked into a contract that will cost more than it should.\u00a0\u00a0<\/span>\u00a0<\/span><\/p>\n

UPS \u2014 fuel rate changes weekly, effective every Monday. UPS takes the average cost of fuel from the two-weeks prior to the Monday the rate goes into effect.\u00a0<\/span>\u00a0<\/span><\/p>\n

FedEx \u2014 fuel rate changes weekly, effective every Monday. FedEx takes the average cost of fuel from the single week prior to the Monday the rate goes into effect.<\/span>\u00a0<\/span><\/p>\n

DHL eCommerce \u2013 fuel rate changes monthly, effective starting first of each calendar month. DHL takes the monthly rounded average from the two months prior to their effective date.<\/span>\u00a0<\/span><\/p>\n

All three major carriers start with the same market price of fuel (from the national U.S. On-Highway average price for a gallon of diesel fuel as published by the U.S. Department of Energy), but because they take their average from a different period of time their base fuel rates can sometimes look quite different.\u00a0<\/span>\u00a0<\/span><\/p>\n

2 Fuel Surcharges\u00a0<\/span><\/i>\u00a0<\/span><\/p>\n

As an additional charge on top of the base fuel rate, each carrier also includes a fuel surcharge. This is calculated as a percentage of the base fuel rate (in some instances it is a flat fee, like with DHL for example) and is applied to most services.\u00a0<\/span>\u00a0<\/span><\/p>\n

Insider tip: UPS raised their fuel surcharge rate three times in the past 18 months to compensate for the rising cost of fuel. While this information is made public, it\u2019s not easily found. Carriers might not even tell shippers directly. Be sure to ask your carrier representative about changes to your invoice frequently.<\/span>\u00a0<\/span><\/p>\n

How do you know what the monetary cost of your fuel surcharge is? That requires a bit of math.\u00a0<\/span>\u00a0<\/span><\/p>\n

Carriers calculate their surcharges through an index-based system. There are three variables to a fuel surcharge index.\u00a0\u00a0<\/span>\u00a0<\/span><\/p>\n