InsightsContact LVTFuel surcharge: what is it and how is it adjusted?
The fuel surcharge appears on almost every freight invoice, but few know exactly how it is calculated. Here is an explanation of the diesel index, base price and monthly adjustment.
The fuel surcharge – sometimes called the diesel surcharge – is a line on almost every freight invoice. Even so, it is one of the items that raises the most questions. Why does it change every month? And why is it not the same with every carrier? Here we explain what a fuel surcharge is, how it is adjusted, and what to look for when you compare rates.
What is a fuel surcharge?
Diesel is one of the biggest costs of running a truck, and the price moves up and down. If the freight rate had to allow for every swing in advance, it would either be too high when diesel is cheap or too low when it rises.
The fuel surcharge solves this. The base freight rate is set against a specific diesel price, and the surcharge then adjusts the price up or down as the diesel price changes. That way you pay for the fuel actually used – no more, no less.
How the fuel surcharge is adjusted
Most models are built on three elements:
- A diesel index. A publicly available diesel price used as the benchmark.
- A base price. The diesel price the base freight rate was calculated from. When the index sits at the base price, the surcharge is zero.
- An adjustment model. A table or formula that sets how much the surcharge changes when the index moves away from the base price.
The surcharge is usually expressed as a percentage of the freight and adjusted monthly. The rate for a given month is often based on the average diesel price in an earlier period, so it is known before the month begins.
The surcharge works both ways. When the diesel price falls, so does the surcharge.
Why does the fuel surcharge differ between companies?
Two carriers can have very different rates in the same month – without one being more expensive than the other. The difference usually comes down to:
- A different base price. If the base freight was calculated at a low diesel price, the surcharge will be higher – and vice versa.
- A different index. Some use one diesel price, others another.
- A different model. The steps in the adjustment table are not the same.
- A different basis. The surcharge may be applied to the freight only or to other services as well.
- A different mode. Ferry, ocean and air freight often have surcharges of their own.
So the percentage alone says little. What you should compare is the total of base freight plus surcharge.
What to ask
When you receive a quote or agree a contract, ask:
- Which diesel index is used?
- What is the base price?
- How often is the surcharge adjusted, and when is the rate published?
- Which parts of the price is the surcharge applied to?
The answers let you compare quotes on equal terms and budget for freight. This matters most in larger tenders, where small differences in the model can add up over a full year.
Other surcharges on the freight invoice
The fuel surcharge is not the only one. Road tolls, ferry surcharges and dangerous goods surcharges can also appear. See an overview in our guide to surcharges and traffic.
LVT's fuel surcharge
We publish our fuel surcharge every month, so you can always see the current rate and plan around it. Find the current rate on our fuel surcharge page.
LVT plans transport from Denmark, Sweden, Norway and Finland to 35 markets and back. With one dedicated contact and online tracking, you keep track of both shipments and costs.
Ask us if you would like the surcharge model explained against your own shipments.