The past two years have been a virtual roller coaster ride of bewilderment as far as the price of gas goes. One summer, prices shoot into the unprecedented $4/gallon range; the next, prices are a more moderate and easygoing $2.50/gallon. Who knows what price fluctuations next year will bring as new environmental regulations kick in and winter takes hold (a time when demand for fuel is highest).

In this difficult-to-predict environment, it’s more important than ever to make sure you set profitable, competitive, and above all, fair hauling rates. Some suggest instead of a fuel surcharge, using a Fuel Cost Adjustment Policy (FuelCAP) to calculate costs is the more equitable way to go. What the FuelCAP allows you to do is separate your fuel costs from the rest of your hauling rate. The main reason for doing that is so you can more accurately calculate the real cost of fuel given current market and freight conditions, rather than applying numbers that don’t directly relate to a specific truck load.

This link provides a more detailed model for how the FuelCAP works.

Trucking expert Timothy D. Brady explains why an “unbundling” approach to determining your hauling rate is a good thing: “By doing it in this manner, you can have your Fixed expenses and Constant Variable expenses (those variable expenses which occur consistently on every load) along with your Profit Margin as your base rate; then add your Volatile or Load Specific expenses (fuel and tolls, etc.) to come up with the total hauling rate. By unbundling your fuel and toll costs from the base rate you would never be left holding the uncompensated fuel bill on a load,” Brady says.

What do you think? Do you believe the FuelCAP is better than the fuel surcharge as a way to assess fuel expenses?