Fuel Prices Near Surcharge Level

TT File Photo

Diesel fuel prices continued to rise last week, making another leap of about 3 cents a gallon, and are closing in on thresholds that may trigger fuel surcharges in freight contracts.

Though most truckload companies have shied away from invoking the additional fee, that may not be the case for long.

The national average price reached $1.075 a gallon on April 5 — up from $1.046 on March 29 and $1.018 on March 22 — according to the federal Energy Information Administration. It marks the sixth consecutive week of a higher cost for diesel, which went over the $1-a-gallon level March 15 for the first time since Nov. 30, 1998.

Many truckload carriers’ contracts call for rate surcharges when the price of fuel passes a threshold, commonly $1.06 a gallon. However, the surcharges — which may involve mileage rates or a percentage of the contract rate — may not kick in until the price climbs 5 cents above the threshold.

John Smith, chief executive officer of CRST Inc. in Cedar Rapids, Iowa, said relatively few of his contracts were tied to the $1.06 figure and noted that surcharge thresholds are not the same throughout the trucking industry — or even the truckload sector. He said some agreements may be pegged to a fuel price of $1.10 or more.

Smith said when prices breach the $1.10 mark, “the surcharges would probably be more or less automatic.”

He recalled previous years, such as 1995, when customers resisted surcharges and many carriers did not implement them. But he said market conditions were different then, with more trucks than business.

“In today’s market, I think surcharges would be accepted,” he said.

Garner Trucking in Finley, Ohio, is taking a more cautious approach.

“They’re all over the lot,” company president Vernon Garner said about contract terms for imposing surcharges. “So much so that you can’t program them into the computer.”

For the full story, see the April 12 print edition of Transport Topics. Subscribe today.