How is a fuel surcharge calculated from a peg price?
Fuel surcharge per mile equals the current diesel price minus the peg price, divided by the MPG basis in the rate agreement, and never less than zero. Many published schedules first round that price difference down to a fixed step such as five cents, which turns the surcharge into a table of price bands, and FSC per load is simply FSC per mile times the linehaul miles.
Founded in 2008 by Scott Elliott in Minnesota, Strong Tower Consulting, LLC (Minnesota File No. 2948628-2) has advised carriers for more than 18 years on the rating engines, fuel tables, and EDI feeds that apply surcharges to freight bills.
Every default below is an example value, not a market figure. Replace the peg, MPG basis, and step with the terms in your rate agreement. For the current diesel price, look up the weekly retail on-highway diesel price at the U.S. Energy Information Administration: eia.gov/petroleum/gasdiesel/. This page does not fetch or store a diesel price.
The diesel price the base linehaul rate already assumes. From your rate agreement.
The EIA weekly retail on-highway diesel price (national or PADD region) your contract names. Look it up at eia.gov and enter it here.
The fuel economy the schedule assumes, from your rate agreement. Not necessarily your actual fleet MPG.
The width of each price band in the stepped schedule. Five cents (0.05) and six cents (0.06) are common contract terms.
Billable miles on the rate confirmation. Use the mileage basis your contract names.
Results from your inputs
Show the math
Generated peg table
Price bands from the peg up to the current price plus $1.00, in increments of the step. The CPM shown for each band is the stepped method value: (band low minus peg) divided by MPG basis. The highlighted row is the band the current price falls in.
| Band | Price low ($/gal) | Price high ($/gal) | FSC per mile | FSC on this load |
|---|
How the model works
Every figure above comes from the five inputs on this page. The calculator does not fetch a diesel price or carry any schedule from a real contract.
- Find the price above the peg. Current diesel price minus peg price. If diesel is at or below the peg, the difference is treated as zero and the surcharge is zero.
- Exact method. Divide the full difference by the MPG basis. This is the surcharge per mile if the schedule tracks every tenth of a cent.
- Stepped method. Round the difference down to the nearest step, then divide by the MPG basis. This produces the band table that most published schedules use.
- Price the load. Multiply FSC per mile, by either method, by the linehaul miles.
- Build the table. Starting at the peg, add one step per row until the band passes the current price plus one dollar, capped at 60 rows.
diff = max(0, current_price - peg_price)
fsc_cpm_exact = diff / mpg_basis
fsc_cpm_stepped = floor(diff / step) x step / mpg_basis
fsc_load_exact = fsc_cpm_exact x linehaul_miles
fsc_load_stepped = fsc_cpm_stepped x linehaul_miles
band_low[n] = peg_price + n x step
band_high[n] = band_low[n] + step
band_cpm[n] = (band_low[n] - peg_price) / mpg_basis
Open "Show the math" above to see these lines filled in with your current numbers.
Exact versus stepped: which one is your contract?
Both methods start from the same idea. The shipper pays the base rate as if diesel were at the peg, and the surcharge makes up the difference. They differ in how the difference is rounded. A schedule written as "for every $0.05 increase above $1.25, add $0.0083 per mile" is a stepped schedule. A schedule written as "(DOE price minus $1.25) divided by 6.0" with no rounding is an exact schedule. Read the fuel clause in the rate confirmation or the master agreement before you pick one. If the rate confirmation attaches a table, it is stepped, and the table above should reproduce it row for row once you enter the same peg, step, and MPG basis.
Rounding direction matters as well. This calculator floors the difference, which is the common convention and favors the shipper by a fraction of a cent. Some tables round to the nearest step. A few round up. A rating engine that applies the wrong rounding will be off by one band on roughly one load in two, which is small per load and large across a year of freight bills.
Where the inputs come from
The weekly diesel price
The U.S. Energy Information Administration publishes the weekly retail on-highway diesel price every Monday afternoon, as a national average and by PADD region, at eia.gov/petroleum/gasdiesel/. Most contracts reference that series. The clause will say which region and whether the surcharge for a load uses the price published the week it ships, the prior week, or a monthly average. Carriers that load the EIA price into the TMS fuel table each week eliminate a recurring source of rating disputes. That feed is a normal part of a TMS implementation, and when the shipper transmits the surcharge on the 204 or expects it on the 210, it belongs in the EDI integration mapping as well.
The peg and MPG basis
Both are negotiated terms. A low peg with a low MPG basis produces a steep schedule that recovers fuel quickly; a high peg with a high MPG basis leaves more fuel risk on the carrier. Neither is right or wrong. What matters is that the rating engine, the invoice, and the shipper's audit all use the same pair of numbers. Fleets that have grown by acquisition often carry several pegs for the same customer without knowing it. A pass over the customer fuel tables in a SQL reporting layer is the fastest way to find them.
The step
Five cents and six cents are common, but a step is whatever the contract says. Brokers who publish their own schedules to carriers sometimes use a different step from the one in their shipper agreement, which is a margin exposure that the freight broker consulting practice looks for in a rating review.
Frequently asked questions
What is a fuel surcharge peg price?
The peg is the diesel price per gallon that the base linehaul rate already assumes. When the posted diesel price is at or below the peg, the fuel surcharge is zero. When diesel rises above the peg, the surcharge recovers the difference. The peg is a contract term agreed between shipper and carrier, so there is no single correct peg. The example value on this page is a placeholder you should replace with the peg in your rate agreement.
Which diesel price should I enter as the current price?
Most contracts reference the U.S. Energy Information Administration weekly retail on-highway diesel price, either the national average or a PADD region, published each Monday at eia.gov. Enter the figure your contract names for the week the load moves. Some agreements use the prior week price or a monthly average. The calculator does not fetch a price for you, so the number is always one you looked up and typed.
What is the difference between the exact and stepped fuel surcharge methods?
The exact method divides the full price difference above the peg by the MPG basis, so the surcharge moves with every cent of diesel. The stepped method first rounds the difference down to the nearest increment, for example five cents, and then divides by MPG. That produces a table of price bands with one cents per mile value per band, which is how most published fuel surcharge schedules are written. Both are shown so you can match whichever method your contract uses.
How is the MPG basis chosen in a fuel surcharge schedule?
The MPG basis is the fuel economy the schedule assumes, not your actual fleet MPG. A lower basis produces a higher surcharge per mile for the same price move. It is negotiated along with the peg and written into the rate agreement. If your fleet runs better than the basis, the surcharge over-recovers fuel cost on that lane; if it runs worse, the surcharge under-recovers. The example basis on this page is a placeholder.
This calculator is a planning estimate, not tax, legal, or accounting advice. Your rate agreement controls the peg, the price series, the rounding rule, and the MPG basis. Confirm the schedule against the signed contract before invoicing.
Put the same fuel table behind every rate, invoice, and EDI transaction.
Strong Tower Consulting provides independent systems architecture, feasibility audits, and engineering roadmaps for motor carriers and freight brokers. Contact our advisory team or call 763-244-1373 to review how fuel surcharges are rated, billed, and reconciled in your TMS.
Strong Tower Consulting, LLC and Exspeedite LLC are separately organized sister companies under common ownership.