Your Fuel Surcharge Program Is Hurting Your Bottom Line. Here’s How To Fix It.

Shippers are navigating a complex landscape of rising costs driven by geopolitical risks, supply chain disruptions, and fluctuating commodity prices. While many factors feel uncontrollable, your approach to fuel costs doesn't have to be one of them. Organizations continue to rely on traditional fuel surcharge programs to manage this volatile expense. However, these programs—often based on outdated base rates and the Department of Energy's (DOE) retail diesel fuel index—can distort true fuel costs and lead to over or underpayments.

As you set budgets and plan for the future, it's crucial to implement a fair fuel reimbursement strategy. A market-based program ensures your costs directly reflect real-time market movements. By adopting a fuel strategy that adapts to daily price fluctuations, your organization can minimize the impact of regional disruptions, stop overpaying for fuel, and foster greater transparency in your carrier relationships.

Key Takeaways

• Traditional fuel surcharge programs, based on the DOE index, rely on average fuel prices rather than reflecting the actual cost, often leading to inaccurate charges for shippers.
• New semi-trucks are far more fuel-efficient, meaning surcharge schedules based on old MPG standards reimburse for fuel that isn't actually used.
• A market-based fuel reimbursement strategy provides transparency, reflects real-time costs, and builds fairer carrier partnerships.
• Switching to a market-based program can happen at any time —you don't need to wait for your next RFP cycle.

The history of costly fuel surcharge programs

First implemented in 1979 to mitigate risk for carriers, the fuel surcharge has remained the standard mechanism for fuel reimbursement. The problem is that the transportation industry has evolved dramatically since then.

Trucks today are more fuel-efficient than ever. In NACFE’s 2019 Regional Run on Less, trucks achieved between 6.5 and 9.6 MPG, with some long-haul shipments reaching an impressive 11.5 MPG. Breakthrough's data shows that shippers in the dry van truckload sector saw a 28% increase in maximum MPG (from 6.4 to 8.2) and a 16% increase in average MPG (from 6.03 to 6.99) between 2014 and 2024 alone.

If your fuel surcharge program doesn't account for these efficiency gains, you are paying for gallons of fuel that your carriers never use. In fact, Breakthrough data reveals that shippers using traditional surcharge schedules pay, on average, 20% more than those on a market-based reimbursement plan.

A market-based program also removes fuel cost assumptions from RFP negotiations. This eliminates ambiguity and delivers a transparent calculation for fuel reimbursement. As a result, negotiations can shift from uncertain energy projections to performance.

5 tips for updating your fuel surcharge program

It’s easy to feel like fuel is an unmanageable expense, but you have the power to ensure you pay a fair and accurate price. As you re-evaluate your strategy, here are five tips to guide you.

1. Ask the right questions

A thorough review begins with curiosity. Do your fuel charge schedules apply to today’s energy market realities? Is there a better way to calculate fair fuel reimbursements? Are your fuel costs fair in relation to where your freight is hauled? Answering these questions will lay the groundwork for a fuel strategy that’s representative of the market.

2. Communicate the “why” 

It’s essential to explain the reasoning behind updating your fuel strategy to both internal teams and carrier partners. Educate them on how outdated surcharge schedules fail to keep up with market changes and highlight the financial and operational value of a system that moves with real-time cost fluctuations.

3. Prioritize transparency

Transitioning to a market-based fuel reimbursement program places transparency at the core of your transportation strategy. With fair fuel prices as the foundation, you can extend this principle to other initiatives, such as network optimization and sustainability targets.

4. Determine the timing 

You don’t have to wait for your next RFP to address fair fuel reimbursement. A transition to a market-based program can be implemented whenever it makes the most sense for your business, allowing you to start realizing benefits sooner.

5. Know your capabilities

A true market-based reimbursement requires access to granular, daily movements in the energy marketplace, which can be challenging for busy teams to manage alone. Leveraging a strategic partner like Breakthrough ensures your fuel costs are always aligned with market realities and gives you the insights needed to optimize your entire transportation network.

Unlock untapped value with a market-based fuel reimbursement strategy

Adapting your fuel reimbursement strategy to align with real-time market dynamics is a strategic imperative. By moving away from antiquated fuel surcharge programs, shippers can reduce costs, create fair partnerships, and improve network efficiency. Embracing modern fuel mechanisms allows your organization to reduce ambiguity in carrier relationships and focus on strategic initiatives that drive real value.