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Is there a better way forward on fuel surcharges?

Researching and writing about fuel prices and their impact on transportation costs since fuel prices initially started to spike back in the late 90s I’ve come to realize– despite what some fuel experts will tell you – the only truly predictable thing about fuel pricing is its volatility and unpredictability. And the resulting impact on transportation buyers and providers who don’t take measures to protect themselves can be substantial.

Fuel surcharges have become a staple of the transportation industry but I’m hearing lot of grumbling from both shippers and carriers about them.

Carriers complain about the added administrative burden that comes with surcharges and about shippers who refuse to accept the higher surcharge levels when prices hit a peak. Shippers show a fair bit of distrust of the surcharge formula mechanisms and how they are applied. For example, a Shipper Pulse Survey conducted by the Canadian Industrial Transportation Association in partnership with us back in 2012 found that only 69% of shippers agreed with the statement “Fuel surcharges are necessary as long as fuel costs continue to be highly volatile.” That should raise concerns among carriers who need surcharges to keep their fuel costs in check.

Of even greater concern should be the fact that only 46% of shippers believed that carriers were generally applying fuel surcharges correctly while 61% believed “fuel surcharges are a way for carriers to squeeze additional revenues for their customers and improve their profits.”

It makes me wonder, are fuel surcharge formulas understood as well as they should? Is there a better way forward? To find out, I’m leading a panel discussion on the issue at the upcoming CITT Reposition National Conference in Toronto, November 3-5. (The fuel surcharge session is on the 4th.)

I’ve got a great bunch of industry experts on the panel: Ginnie Venslovaitis, CITT, director, transportation operations, Hudson’s Bay Company; Jeff Bryan, president and CEO, Jeff Bryan Transport Ltd., and chairman, Ontario Trucking Association; Mark Lerner, assistant vice president, domestic intermodal, CN; Richard Patenaude, director, client integration and development, Wheels Group; Roger McKnight, Senior petroleum analyst, En-Pro International.

We are going to look at where diesel pricing is headed; explain how surcharges should work from both the carrier and shipper points of view; and debate what is the best way forward.

It’s going to be an engaging and informative session and I hope to see you there. And while you’re considering this session, take a moment to look at all the other sessions planned for Reposition 2013. I think this is the most information (and fun) packed conference CITT has ever put together.

All the information is available at

Lou Smyrlis

Lou Smyrlis

With more than 25 years of experience reporting on transportation issues, Lou is one of the more recognizable personalities in the industry. An award-winning writer well known for his insightful writing and meticulous market analysis, he is a leading authority on industry trends and statistics.
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3 Comments » for Is there a better way forward on fuel surcharges?
  1. Jack Bradley says:

    Lou, as I wrote against a similar article you had on your web site perhaps by discussing this more we’ll get some ‘movement’…

    I think the time has come to restart the benchmark. Looking at the FCA levels over the past few years the price of Fuel has stabilized somewhat.

    Let’s look to get something better than 1999’s $0.39/L as our benchmark moving forward. Over 14 years with the same benchmark and some price stabilization makes this a good time to roll the surcharges in to the base price and start over.

    Perhaps shippers/carriers can put some language in their annual tariffs/contract to protect against any social/economic wide fluctuations in future fuel prices; the week to week up/down needs to go away in my opinion.

    What other industry uses a benchmark for surcharging that is not in this ‘century’? Let’s all work together as industry partners to bring this in step with the times. The time has come.

  2. Kevin says:

    Surcharges should have been dispensed with a year after they came out. There is no doubt that they were used at the time because of the fuel pricing volatility. Every year using the previous year’s benchmark fuel prices, all carriers should have been reviewing their cost per hour,mile,tonne and increasing their rates accordingly to include the increase in fuel price. This really isn’t a complicated idea. I think it is one area that is left in freight pricing where shippers can play games by negotiating fuel surcharges constantly. Every Canadian see’s their cost of living/inflation go up every year and we need to adjust our personal budgets accordingly. Why do shipping managers or carriers that aren’t willing to increase the rates feel that they can buck the inevitable?

  3. Joe Carusi says:

    I believe that customers have lost confidence in FSC due the many different methods being used by carriers.
    Numbers are manipulated to meet the bottom line. If customers would see an industry wide FSC they can then compare base rates of carriers. Carriers have no choice but adapt to market conditions as margins are always so thin in our industry. The customers have to be part of the solution to regain confidence.

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