As fuel prices have continued to climb in 2022, so has the fuel surcharge (FSC) billable on DOD household goods moves. The current fuel surcharge is 24%, the highest rate it has ever reached since the baseline diesel price was set at $2.50 in 2007. This record level has created questions about whether the fuel surcharge has hit a maximum cap or if it can continue to increase. We wanted to answer those questions, share some background information, and provide a helpful reference tool for calculating FSC with these record fuel costs.
How is FSC% Calculated?
FSC is calculated as a percentage of the transportation charge. The applicable percentage is calculated by adding 1% for every $0.13 the fuel price is above $2.50, as recorded on the first Monday of the month by the US Energy’s Information Administration.
Is there a maximum FSC%?
No, but there is a valid reason that some are questioning this. FSC policy is dictated by the TR-12, which lays out rules and calculations, and provides a helpful chart to assist with calculation. Unfortunately, the chart ends with a fuel price between $5.361 and $5.49 and a resulting FSC of 23%. However, this month the average fuel price was $5.509, which is literally “off the chart.” This has led to some questioning if 23% was the maximum FSC. However, the line in the TR-12 that precedes the chart states:
The table ends at $5.490, but the same principle applies to fuel costs above that dollar amount.
To accommodate the calculation of diesel prices beyond the limit of the chart, Daycos has created our own unofficial FSC% chart, which you can use for the calculation of FSC% when diesel prices are between $2.50 and $9.39.
What is the future of FSC?
As mentioned, this is a historically high number. We have not seen fuel above $4.00 since 2014, and from November 2019 through February 2021, there was no fuel surcharge as the baseline rate was below $2.50. According to this May forecast from DOE EIA, oil prices may be nearing their peak, but there is a strong possibility they will stay near these record levels through 2023. If that is the case, the FSC rates may continue to be literally “off the charts.”