September 4, 1996
Barely emerging from a fuel crisis, motor carriers are again faced with steep fuel price increases. The Freight Carriers Association of Canada (FCA) who monitors fuel prices on an ongoing basis reports that since July some carriers have increases as high as 19% on their base fuel price. Indications from many sources are that prices will continue to rise.
In the US, the situation is similar and the ‘Big Four’ carriers (ABF, CF, Yellow & Roadway) have implemented fuel surcharges, currently at 1.5% on all shipments (US Domestic as well as Canada/US) and many others are following suit.
Fuel costs represent a significant portion of motor carrier’s operating costs and carriers had already absorbed a large portion of the fuel increases experienced earlier this year, causing a decline in operating results. ‘It is impossible for the industry to continue to absorb these increases, they must be passed on.’ As a rule of thumb, for every 5 cent per litre increase in fuel, motor carriers need fuel surcharges of 1% on LTL and 2.3% on TL to recover their costs.
The fuel surcharge calculation, using industry average fuel cost increases and fuel to revenue relationships, the .04 cents per litre increase results in carriers needing an additional .7% on LTL and 1.6% on TL to offset their fuel cost increases. Many carriers have paid larger increases or have higher percentage of fuel costs than industry averages (especially long haul carriers), requiring higher surcharge percentages.
The Tariff Advisory Committee of the FCA is recommending motor carriers implement a fuel surcharge to offset the increase in fuel costs They also recommend carriers keep their surcharges in effect for 30 days after the fuel prices return to their pre-crisis level to recover increases already absorbed. FCA will continue to monitor fuel prices, keeping the industry informed of changes.
The FCA represents over 100 general freight carriers in matters related to economics, costing, pricing and finances, as well as industry statistics. The FCA, whose members operate in all Provinces of Canada, has been serving the trucking industry for more than half a century. The Tariff Advisory Committee (TAC) is composed of motor carrier executives elected by the membership to monitor the industry’s financial condition and make recommendations.