A charge added to the base shipping rate to account for fluctuations in fuel costs is determined through a formula. This formula typically involves multiplying the current price of fuel by a factor representing the carrier’s fuel consumption and dividing the result by a fixed baseline fuel price. For example, if fuel costs have increased significantly since the baseline was established, the resulting calculation yields a surcharge amount added to the shipping cost.
This practice provides a mechanism for carriers to mitigate the financial impact of unpredictable fuel prices, ensuring stable service provision despite market volatility. Historically, these adjustments became widespread in the transportation industry following periods of significant fuel price increases. By implementing them, carriers can maintain profitability and avoid passing the full burden of fuel cost increases directly to the base rates, which can lead to greater price stability in the long term.
