Fleet Ops: Fuel Efficiency
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No Matter How They Crunch Numbers, Shippers Need to Pay Surcharges: CTA
OTTAWA – Canadian Trucking Alliance boss David Bradley is once again reminding shippers they need to pay up to mitigate the cost of fuel for truckers. He says shippers who question the merit of fuel surcharges, and how they're calculated, should remember that they themselves were responsible for their creation. "We should remind ourselves that the reason fuel surcharges evolved the way they did was because that was how shippers said they wanted it. It was easy to understand and to calculate," Bradley writes. "Some shippers allege that fuel surcharges only go one way -- up. They might feel that way, but that’s a bit disingenuous. Fuel surcharges track fuel prices. It’s not the trucking industry’s fault that fuel prices have been sky-rocketing on an upward trajectory and show little sign of abating."

Surcharge formulas are benchmarks, says CTA.
Paying is the important part.
Bradley says that carriers do tweak their fuel surcharges to reflect the reality of the cost of fuel. Some shippers also complain that when fuel surcharges are calculated as percentage of the freight rate, shippers with higher rates pay. But while that may be true to a point, says Bradley, shippers in a head haul market pay more than those in a backhaul or in a depressed market. "The fuel surcharge in a backhaul market usually falls well short of compensating the carrier for fuel cost increases," he sates. "Rates in those markets often do not cover basic costs, let alone fuel or a profit." Bradley urges shippers to work with their carriers to come up with whatever index they want. But, he adds, shippers should stick with it. "Regardless of the formula you favour, they are both simply benchmarks after all. To a degree everything is distance-based already," he states. "However, moving to a wholly distance-based approach would be complex. Bradley says there would be a number of complicating factors -- topography, load weights and equipment types would all have to be considered. Furthermore, carriers pay for every drop of fuel they consume on every mile they run; and every hour they sit at a border waiting to cross, or are delayed in loading/unloading, or are stuck in traffic congestion. "What about empty miles? " Bradley writes. "What about summer versus winter fuel? Invariably, carriers see what is happening and start pushing up base rates or increasing fuel surcharges to compensate. "The carrier has got to be paid one way or another, at least until we find a way to run our trucks without the need for fuel. In the end, the debate over a percentage-based versus a distance-based formula is a bit like splitting hairs." Bradley suggests an alternative carriers might agree to is a recalculation of the underlying base rate used to calculate the fuel surcharge. "Resolving this however, would require true partnership between shippers and carriers and I am not sure the level of trust is there in all cases yet," he adds.
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