CTA does the math on fuel surcharges, rates

GATINEAU, Que. — Two plus two must equal four when it comes to paying for fuel surcharges and negotiating rates, Canadian Trucking Alliance CEO David Bradley told a shipping group last week.

Speaking at 50th annual conference of the Pharmaceutical and Personal Care Logistics Association, Bradley said that with the price of diesel fuel hitting record highs and displacing labor as most carriers’ top operating cost, "however you cut it, whatever fuel surcharge formula you use, carriers need to generate enough revenue to survive."

"The combination of the base rate, fuel surcharge, accessorial and other charges must add up to an amount that provides for an adequate return on investment," he says, "two plus two must equal four at the end of the day."

Whatever fuel surcharge formula shippers choose,
truckers want it to be consistent, Bradley says.

Bradley acknowledged the "bizarre" situation these days, where for some fleets, upwards of 40 to 50 percent of current revenues are the result of fuel surcharges. However, he cautioned, "putting that genie back in the bottle is extremely difficult."

"Changing fuel surcharges in isolation of rates is not tenable for carriers. You want a new formula, fine. But you have to look at all the fuel used to pick-up and deliver your load. You want lower fuel surcharges, fine. But then rates have to go up."

"Whatever formula you come up with," he said, "carriers want you to stick to it."

Bradley urged the shippers to take a longer term view and lock in capacity now. "Many markets are soft right now, there is excess capacity and changing balance. But the capacity situation will resolve itself and when it does things could tighten quickly." 

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