Fuel Surcharge

I overheard one of our Owner Operators at a Pilot Travel Center yesterday, "0.27 cents surcharge a gallon?  What's the Point?"

I saw him again later and sat with him to explain "the Point!"  This is not the first time I have heard this and recall a driver at the terminal in Laredo who was almost in tears, surrounded by a mountain of paper which spewed from a very impressive calculator complete with a printer.

There will be some who might feel insulted by this article, mainly because they know what they are doing but for those - like these two - who don't, pay attention.  First of all, the above mentioned driver thought that he received 0.27 cents for each gallon he pumped into his tanks.  Wrong!  It's 0.27 cents per mile and this is why a higher MPG is so important.

There is a very simple formula to calculate your net cost per gallon.

Let's take the above example of .27 cents.  If you achieve 7 (mpg) and multiply that by the fuel surcharge (fs) you receive $1.89 per gallon purchased, if the fuel cost (fc) is $2.90 your net cost (net) per gallon is $1.01.

This is why your mpg is so important, it's the only part of the formula you can change.  For example, if you are managing 8 mpg your net cost per gallon of fuel is 74 cents and so on.

The two guys I spoke with didn't believe me - at first.  I had to demonstrate the formula to one of them several times before he clicked.  Not that I blame them for their lack of faith, I didn't believe it either when I was planning to buy my truck.  I looked at the formula and kept getting results I didn't think could possibly be right.  I took my results to the fuel department and asked them what I was missing.  "Nothing." they said.  "You are exactly correct."

I have seen commercials for trucking companies offering regulated fuel costs.  "$1.25 per gallon fuel cost guaranteed!"  Are you serious?  Who believes that is a good business idea?  It's a good idea for the trucking company but not for the Owner Operator .... well maybe if the O/O is driving a W900 with a Cat.  Currently my average fuel cost is .752 cents per gallon, or of course I could go to one of those companies offering regulated fuel prices and pay .498 cents more?  Which would you choose?

A fuel surcharge is a way of adjusting the amount paid to move freight by taking into account significant variation in fuel prices, compared to historical levels. It is a method for sharing or transferring risk. Most carriers and shippers participate in a fuel program of some kind.

The two biggest expenses for Truck Owners is Fuel and Tires.  These costs have to be managed carefully if we are to be successful.  We had trouble with our steer tires right out of the gate, three sets of wasted tires before we found the solution.  It was an expense we didn't need and a waste of money.  We take care of our tires as far as we are able and that's the same with our fuel.  We constantly monitor our fuel expenses and seek out the best fuel prices we can find.

We use the EFS app for the cheapest fuel and with the current low fuel prices we are doing very well, even to the point where a recent visit to a Pilot Travel Center actually cost us in the Negative.  We were paid .05 cents per gallon to haul the stuff away.  Sweet.

Manage your fuel and the dollars will take care of themselves.

Have a safe and profitable day.