As the government shutdown grinds into its third week businesses are being disrupted in a number of surprising ways, and one of them is the levying of fuel surcharges.
Most transportation contracts with a fuel surcharge table rely on a small agency called the Energy Information Agency (EIA) within the Department of Energy to report weekly national average diesel prices. Every Monday around 5:00 p.m. EST, someone within your company could well visit the EIA website to check the latest average diesel price.
Today, October 14, 2013, they are likely to be disappointed, because according to Reuters the EIA ran out of funding on October 11, preventing the agency from posting updates to its fuel index.
What can you do to obtain the missing data?
Well, if you’ve read our white paper on fuel surcharges Truckload Fuel Surcharges: How They Work and What They Cost you will know that there are a number of industry fuel indexes, and they tend to fluctuate at almost the same rate on a weekly basis. Regional indexes generally correlate closely to the national DOE figure (for more on our research into index pricing see the TMC post Anatomy of a Fuel Surcharge: Does the Choice of Index Matter?). Moreover, the variance does not change significantly over time.
So, pick any fuel index that is readily available to service providers (for example at least three are listed in the publication Transport Topics each week). Figure out the difference between the average price for diesel posted by the EIA last week and the value posted by your new index. Better yet, compute the average offset for the last 52 weeks. Next, add or subtract the offset from the latest price published by the new index, and you’re in business.
Of course, this adjustment method is somewhat simplistic. In all likelihood your fuel surcharge is embedded in a larger freight contract which you may or may not want to revisit.
Another approach is to roll with your current fuel surcharge. For the last 13 weeks fuel prices have stayed in a narrow range from $3.867 to $3.981 per gallon, so it’s possible that there will not be much change over the coming weeks.
On the other hand, there is no guarantee that prices will not stray outside of this range. Also, eventually you will need to modify the terms of your current freight contract. After all, freight still has to be moved and carriers have to be paid.
On balance, a proactive approach to adjusting your fuel surcharge is probably best. And at least the shutdown might have familiarized you with other approaches to making this adjustment.