Why Do Shippers Use The DOE Fuel Surcharge? A History Of The National Fuel Surcharge

For decades, many shippers have reimbursed carriers for fuel using surcharge schedules passed down through generations. These schedules almost universally rely on the Department of Energy (DOE) weekly retail diesel index as a primary input. But in a world of real-time data and advanced analytics, is this 40-year-old practice still effective?

This practice is an outdated and inaccurate method for managing one of transportation's largest and most volatile costs. It's one of the few areas in transportation management that hasn't been significantly updated for decades, leaving shippers exposed to unnecessary costs and market distortions.

Key Takeaways

• Outdated Methodology: The DOE fuel surcharge is based on a national average price index established in the 1970s, making it largely irrelevant in today's dynamic market.
• Inherent Inaccuracies: The DOE index creates distortions by averaging four key variables: the time of fuel purchase, the price (retail vs. wholesale), state-by-state fuel taxes, and regional geography.
• Financial Impact: These inaccuracies consistently lead to either over-reimbursing or under-reimbursing carriers for their actual fuel costs, impacting your bottom line and carrier relationships.
• A Modern Solution Exists: Market-based fuel management programs like Breakthrough Fuel Recovery offer a data-driven, accurate, and fair alternative to the traditional DOE fuel surcharge.

How accurate is the DOE fuel surcharge?

The reality is the DOE fuel surcharge is not accurate. It’s based on a weekly national average retail price, which fails to capture the true cost of fuel for any specific freight movement.

The inaccuracy stems from four key distortions that a national average doesn't account for:

• Time: The DOE provides a weekly price update, but diesel prices fluctuate daily.
• Price: The index is based on retail prices, but well-managed carriers typically purchase fuel at lower, wholesale prices.
• Tax: Fuel taxes vary significantly from state to state. A national average doesn't reflect the actual tax liability incurred along a specific route.
• Geography: Diesel commodity costs differ substantially across the country. A lane from Colorado to California will have a very different fuel cost profile than a lane from Illinois to Georgia.

When you calculate reimbursements using a DOE fuel surcharge index, these factors are ignored, creating an average price that rarely matches reality.

If it's so inaccurate, why do shippers still use the DOE fuel surcharge?

The DOE fuel surcharge has been around for over 40 years because of its long history. It was established during the volatile market conditions of the 1970s and 80s as a simple way to manage fluctuating fuel prices. It became an industry standard before the widespread availability of real-time data and advanced technology.

For many organizations, it’s simply a matter of "that's how we've always done it." Shippers continue to use surcharge schedules that have been in place for generations without questioning their relevance to modern supply chain strategies. However, in no other area of business are 40-year-old data practices considered acceptable, especially for a line item that can represent 20-30% of total transportation spend.

What is the alternative to the DOE fuel surcharge?

The alternative is a market-based fuel management solution. Instead of relying on a national average, this approach uses real-time, lane-level data to calculate fair and accurate fuel reimbursements.

Breakthrough's Fuel Recovery program creates transparency and visibility into the true cost of fuel. By calculating reimbursements based on the specifics of each freight movement, it eliminates the distortions of the DOE index. This ensures that the amount a shipper reimburses reflects what their carriers actually paid at the pump.

This data-driven approach moves fuel from a managed cost to a pass-through expense, which is fair for both shippers and carriers. Shippers reduce their fuel costs and are protected from overpaying, while carriers are made whole on their fuel expenses, reducing the risk they take on volatile fuel prices.

Breakthrough’s Fuel Recovery clients report an average 20% truckload fuel cost savings and 40% intermodal fuel cost savings. For example, organizations like Altium Packaging and Orgain have shared their perspective on the implementation process and the immediate positive impact on their operations. 

DOE fuel surcharge frequently asked questions

Does the DOE fuel surcharge fairly compensate carriers?

Depending on the market, a DOE fuel surcharge is often unfair to either the shipper or the carrier. When fuel prices at the pump are below the DOE average, shippers overpay. When fuel prices at the pump are above the DOE average, carriers are not fully compensated for their costs. This creates unnecessary friction in shipper-carrier relationships. A market-based approach establishes fairness by reimbursing for the actual cost of fuel, making carriers whole and strengthening partnerships.

How difficult is it to move away from a DOE surcharge program?

Transitioning from a traditional surcharge program is more straightforward than most organizations expect. Breakthrough is compatible with any system and works directly with shippers using their existing transportation data. A typical implementation takes 4 to 6 weeks and requires minimal time from your internal tech team. Furthermore, there's a high probability your carriers are already familiar with Fuel Recovery; on average, 84% of a prospective client's miles are hauled by carriers already in our program.

What are the benefits of switching beyond cost savings?

While the average 20% reduction in truckload fuel spend is a primary driver, the benefits extend further. Adopting a market-based approach provides clear visibility into your network's fuel consumption. This establishes an accurate baseline for tracking and managing transportation emissions, supporting your organization's sustainability goals. It also provides better data for network optimization and strategic decision-making, turning a volatile expense into a strategic advantage.