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Understanding Fuel Surcharges In Freight Shipping

No matter what type of shipping option you use, there’s one fact everyone learns pretty quickly – fuel surcharges can add up in a hurry.

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.

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