Fuel surcharges are tacked on to shipments by carriers to balance the fluctuating costs of fuel. This can become a concern for shippers, because it takes time and attention to fully understand them.
Recent Impact of Events In Ukraine
In early 2022, supply chain congestion had already led to year-over-year rises in costs at the pump. However, the invasion of Ukraine by Russia in February 2022 led to a significant spike in fuel surcharges across the U.S. and around the globe.
For context, the national average price for diesel was $3.846 on January 31, 2022. By March 7th, that price had risen by more than a dollar to $4.849 per gallon.
At first, the increase doesn’t make much sense for the American market. At the time of the invasion, the U.S. was a small-time buyer of Russian oil. However, the oil market is, in fact, a global market. And that is where the challenges arise for Americans.
In the grand scheme of things, Russia has been a large player in the global oil and fuel market. Europe, for example, purchased 60% of Russia’s oil exports in 2021. China also purchased 20% of Russia’s oil exports that year.
As a result, fuel surcharges will most likely remain volatile throughout 2022 as shippers and carriers deal with uncertainty abroad.
The Bottom Line.
Fuel surcharges are a valuable tool for carriers to protect themselves against fuel price increases over the life of a contract. At the same time, they’re also a factor that can greatly impact overall shipping costs. Knowing how they work is essential in fully understanding your cost of operations.