How Does The Rising Cost of Fuel Impact Your Business? | ATBS
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How Does The Rising Cost of Fuel Impact Your Business?

Why is the Price of Fuel Going Up?

Fuel prices have begun rising sharply in recent weeks, and many analysts expect the trend to continue. A major reason is growing instability in the Middle East, particularly conflict involving Iran and potential disruptions to the Strait of Hormuz.

The Strait of Hormuz is one of the most important oil shipping routes in the world, with roughly a fifth of global oil supply passing through it each day. When access to this route is threatened or restricted, oil markets react quickly, and prices often rise.

At the same time, tensions in the region are creating uncertainty around Middle Eastern oil production and exports. Because oil is traded on a global market, disruptions in supply anywhere can quickly push prices higher worldwide. As crude oil prices rise, gasoline and diesel prices typically follow.

For the trucking industry, this is especially important. Fuel is one of the largest expenses for owner-operators, and rapid increases in diesel prices can quickly impact profitability. Industry expectations are that prices may continue climbing in the coming weeks, making it important for drivers to stay aware of how rising fuel costs can affect their business. Owner-operators should be prepared to adapt and pivot in their businesses to compensate for the higher expense.


What is a Fuel Surcharge?

A fuel surcharge is a mechanism in the trucking industry that helps balance the fluctuations in the cost of fuel. Incorporating a fuel surcharge into transportation pricing became a widely accepted practice years ago. For those who have been in the transportation industry for a while, you may remember that fuel spiked above $4.00/gallon for the first time in U.S. history after Hurricane Katrina. This spike in fuel prices may have put the trucking industry out of business if fuel surcharges hadn’t offset the additional cost of fuel. In today’s world, there are a variety of sources for fuel information, and the fuel surcharge is calculated in many different ways. For simplicity, we will look at one of the most common methods to calculate fuel surcharge based on today’s numbers. An example of a common formula is listed below:


Fuel Surcharge =

[the current price of a gallon of fuel - the base price of a gallon of fuel in a shipping contract] /

the average miles per gallon of a truck


Example Price per Gallon = $5

Base Price = $1.25

$5 - $1.25 = $3.75

$3.75 / 6.5 mpg = $0.58 CPM fuel surcharge


This surcharge helps owner-operators offset the costs of high fuel prices, especially in times like these. Read more about how Fuel Surcharge works here.


How Can You Make More Money with the Fuel Surcharge?

You often hear Independent Contractors who say they “make money” off of fuel surcharge. The higher the price of fuel, the more they make! How can that be? To win this “game” you have to get better fuel economy than the miles per gallon (“mpg”) the fuel surcharge is based upon.


Let’s look at these examples of a 1000-mile load:



As you can see from the chart above, the better your miles per gallon, the more you save on fuel, and in most cases, you actually make a profit from the fuel surcharge. Please keep in mind that the calculations above depict just one example of how fuel surcharge could be calculated - actual calculations may vary significantly.


How Can You Modify Driving Habits to Save on Fuel?

As a truck driver, you actually have a lot of control over how much money you spend on fuel. There are several ways you can modify your driving habits right now that can put extra money in your pocket.


  • Slow down - generally, 10 mph equals 1 mpg

  • Find the “sweet spot” - lower RPMs burn less fuel

  • Be smart with braking

  • Stay in higher gears when possible

  • Think about and use your tractor’s momentum when possible

  • Utilize cruise control when it is safe to do so

  • Cut out of route miles

  • Minimize idling


To learn more about each of these topics and put these practices into action, read our article here.


How Can You Manage Cash Flow with Rising Fuel Costs?

As an owner-operator, one of the most important pieces of your business that you need to manage is your cash flow. How much money (cash) you have coming in, versus how much money you have going out for your business and home expenses. When fuel prices are high, this becomes even more important. Read more about when you should fill up your tank, the dangers of cash advances, and how to plan your fuel-ups accordingly by reading our article here.


How Can You Optimize Fuel Using Discount Networks and Fuel Cards?

If you’re hauling freight for a carrier, stay within their fuel network to take advantage of their negotiated discounts. If they offer a fuel optimizer program, take advantage of that too.


Thanks to the ever-growing list of fuel cards and smartphone apps, owner-operators have the tools needed to ensure they are paying the lowest price possible for fuel during their next fill-up. Fuel cards are designed to offer carriers and drivers per-gallon discounts on fuel and other services specific to trucking.


There are many different types of fuel cards offered by a variety of companies. Some fuel cards are offered by truck stops, some are offered by fuel providers/oil & gas companies, some by trucking and driver associations, and others by companies whose only service is their fuel card.


Based on conversations our team has had with our owner-operator clients, ATBS is able to list a few fuel cards that we often hear about:


For more information about fuel card discounts, check out our article here.


The Bottom Line

There is no denying that fuel is going up, and you will need to adjust how you do business. As fuel rises, you might need to take an extra load to compensate for the lag in fuel surcharge, but the best operators will do just as well, if not better, with the high price of fuel!

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