Calculation of fuel surcharge: FPInnovations can help you

The price of diesel fuel has risen dramatically in the last few months. As a result, FPInnovations has received numerous inquiries from its members regarding the fuel surcharges they pay their contractors. As the fuel surcharges have been quite large, they want to ensure that the surcharges are being calculated fairly. The following are the most common questions we receive. 

What is a fuel surcharge? 

Fuel is an important component of transportation and harvesting costs. Contractor rates are calculated at a set diesel fuel price, normally below the market price. As the price at the pump for diesel fluctuates, compensation must be calculated to cover the difference between the set rate and the price that the contractor actually pays for fuel. This is the fuel surcharge. 

How is the fuel surcharge calculated? 

There are many ways to determine the fuel surcharge. 

For trucks 

The two most common methods for calculating the fuel surcharge for trucks are described as follows:  

(1)  Pay directly for the amount of fuel consumed in a given period based on an average fuel consumption (L/100 km), distance travelled in a given period, and the difference in fuel price between the actual price and price used in the original haul rate calculation.  

Surcharge ($) = km travelled / 100 × L/100 km × (actual fuel price fuel price in haul rate) 

For example, if the original haul rate was based on a fuel price of $0.50/L, average fuel consumption was 65 L/100 km, distance travelled in the week was 1000 km, and the current price at the pump is $1.50/L, the surcharge for the week would be $650.  

(2) Adjust the haul rate ($/t or $/m³) based on the percentage difference in fuel price between the actual price and price used in the haul rate, and the percentage of fuel cost in the total rate.  

Adjusted rate ($/t) = (1 + % adjustment) × haul rate, where 

% adjustment = (actual fuel price – fuel price in haul rate) / fuel price in haul rate × % of fuel cost in total haul cost 

For example, if the base fuel price was $0.50/L, the current price at the pump is $1.50/L, and that fuel cost was 35% of the haul rate, the rate would have to be adjusted by 70%. If the haul rate was $15/t, the adjusted rate would be $25.50/t. 

Although method (1) is simpler, it requires that you know the kilometres travelled by a truck in a given period. For log trucks, this is neither constant nor readily available, whereas the tonnage or volume transported from a given haul block is known. 

For harvesting machines  

Method (2) as described above can be used. However, the fuel consumption of a harvesting machine is highly dependent on the type of machine, stand, terrain, and weather conditions. As well, the percentage of fuel cost in the harvesting rate will fluctuate. It may be necessary to use tools such as FPInnovations’ ProCalc or spreadsheets to calculate the proper adjustment.  

Can I use one equation for the fuel surcharge for all my hauls and one for all my harvesting? 

You could but that is not a good idea, neither for trucks nor machines. For trucks, the percentage of fuel in the total cost varies greatly depending on the haul distance. With one equation, you will end up paying far too much for short hauls and not nearly enough for long hauls. On shorter hauls, the truck will spend more time waiting and getting loaded or unloaded. When idling or stopped, the fuel consumption per hour is 10% or less than when travelling. Since other costs that make up a rate are mostly fixed (capital, depreciation, services, labour, maintenance) and the cost of fuel will vary by haul distance, the percentage of fuel in the haul rate will vary by distance. 

The percentage of fuel will also vary based on the kilometres travelled on different classes of road, since fuel consumption on highways is lower, on a L/100 km basis, than on a primary resource road, which in turn is lower than on lower-class resource roads. 

For harvesting machines, productivity and hourly fuel consumption will vary based on stand conditions, so the cost of fuel per cubic metre will vary from one stand to another. As for trucks, the other costs are mostly fixed on an hourly basis. 

So, I don’t have to worry about the haul or harvesting rate changing due to costs other than fuel? 

Not entirely. With the disruptions in the markets and supply chain issues, the purchase cost of equipment (hydraulic machines, trucks, trailers), parts, and supplies have also been going up significantly. It is a good idea to periodically review your rates in times of economic turbulence, especially if your contractors need to replace new equipment. As well, with rising inflation, labour costs will increase.  

Can I just use the inflation rate to adjust these costs? 

The Consumer Price Index (CPI) is the most common inflation reference. It may be adequate for adjusting your labour rate but it is not necessarily well adapted for the price of equipment, parts, and supplies. These costs are more closely linked to the price of commodities (steel, aluminum, rubber) and supply chain issues. The best way to adjust is to periodically check with suppliers for the purchase price of equipment and supplies. 

A recent survey by the Professional Loggers Association in the state of Maine looked at a variety of products and services consumed by the logging industry and pegged inflation during the period of 2020-2022 at 24%, well above the CPI. 

For trucks, can I just use a service that provides a fuel index? 

There are numerous services that provide a fuel index that can be used to calculate a fuel surcharge, such as the Freight Carriers Association of Canada. These rates are generated for highway trucks in either less-than-truckload (LTL) or truckload (TL) operations. Trucks hauling raw forest products (logs or chips) have much higher fuel consumptions than regular highway trucks. Furthermore, the published rate adjustments will not necessarily be based on the same base fuel price on which your rates are based. 

What if I need help? 

FPInnovations has the tools and knowledge to assist you. For trucks, our trucking rate Excel spreadsheet has a built-in fuel surcharge table. For harvesting machines, you can get typical fuel consumption from our guide, In Forestry Operations, Fuel Economy Counts! and productivity in different stand conditions using our online ProCalc tool. For an overview of ProCalc, watch this video. 

FPInnovations members can get access to the ProCalc tool. For additional information or to get customized help about fuel surcharges, please contact Steve Mercier, Lead Researcher in FPInnovations’ Transportation and Infrastructure group at