Why Do You Levy Fuel Surcharges?

Jim Luff
Posted on January 18, 2012
We are frequently asked by clients why we have a fuel surcharge. Nobody likes surcharges. Most people feel that you should just charge enough in your price to cover the cost of your operating expenses and provide a final price.
Have you ever looked at your phone bill? It is full of numerous surcharges such as 911, communications for the deaf and other such things. Most people never look at the fine print of the phone bill because the bottom line is, you must pay the total amount or you don’t have phone service. It is not that simple when chartering a livery vehicle.
There are not as many surcharges to review so people tend to read them and question them because they do have the choice of going somewhere else if they feel they are being gouged. I firmly believe that certain things such as airport fees, parking fees at the airport, and taxes assessed on operators should be included when determining your rates. The fees at the airport — whether access fees, usage fees or parking fees — are for the most part predetermined. It is very simple to eliminate silly terms such as “STC” and just charge enough to cover your costs for picking up a client at the airport.
Fuel charges fluctuate all over the chart. The further a vehicle travels from its base of operation, the more fuel it will use. In this case, a fuel surcharge actually could benefit the client and provide a level of fairness. I usually explain to people that we did not create the concept of a fuel surcharge. Large companies involved in transportation created the concept. This includes familiar companies such as Fed Ex, UPS and trucking companies. It is intended to cause those who consume more fuel to pay for what they consume. It is the same concept UPS uses to send a package. The further your package travels, the more it costs even if the weight of the package remains the same.
Because the price of fuel fluctuates, it allows a mechanism to reduce the cost of service as fuel prices fall and increase the price as the cost of fuel to us rises. This could ultimately save the client money instead of just factoring in a constant estimate of fuel costs into the hourly rate.
    Jim Luff, LCT contributing editor

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Jim Luff Contributing Editor
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