News
MTMC finalizing fuel surcharge program
OOIDA advocates higher amount and a direct pass-through

The Military Traffic Management Command is in the final stages of drafting a fuel surcharge program for motor carriers that would automatically adjust surcharges as fuel prices go higher. In the past, motor carriers incurring high diesel costs faced long delays in receiving MTMC fuel surcharges, but MTMC's Commanding General, Maj. Gen. Kenneth L. Privratsky, promises a new plan.

Privratsky's aim is to make the surcharges automatic by linking them directly to the price of fuel. To achieve that goal, a joint MTMC-industry fuel board was formed in November. The board is chaired by Col. Clark Hall, chief-of-staff, who says he does not expect motor carriers to absorb increased fuel prices out of profit margin. Hall says the fuel surcharge is a necessity for military readiness.

"We do not want drivers refusing military cargoes," said Hall. The policy drafted provides an effective date of April 1, 2001.

How will it work? When the Department of Energy's (DOE) posted fuel price (www.eia.doe.gov/) exceeds the neutral range amount, the carrier will be entitled to the specific fuel rate "adjustment" percentage based on the applicable fuel cost per gallon range. For example, if the national average is $1.52, the carrier will be entitled to a fuel-related surcharge of 3 percent. The fuel adjustment will automatically apply to shipments picked up on the 15th of the month through the 14th day of the following month. If fuel climbs to $1.70, the rate adjustment would be 4 percent. If fuel skyrockets and motor carriers are paying two bucks a gallon, the adjustment would be 7 percent. However, if fuel is $1.30 or lower, there will be no adjustment.

The surcharge is automatically recalculated monthly and adjusted upward or downward depending on the DOE national average price on the first Monday of the month.

An overwhelming majority of the carriers that move MTMC's shipments utilize owner-operators to provide the transportation. Todd Spencer, executive vice president of the Owner-Operator Independent Drivers Association, says the OOIDA membership is "very concerned with fuel prices and policies that can assure reliable transportation services to MTMC." Spencer says he has reviewed the MTMC fuel surcharge proposal and suggests two items for modification.

"First, the formula in the proposal seems inadequate to significantly offset the increased costs truckers are incurring as a result of higher fuel prices," Spencer told MTMC's Ruth Tetrault in a letter dated Dec. 21. "The $1.30 starting figure is higher than it should be to accurately reflect the run-up in fuel prices that truckers have experienced. That run-up actually started in the second quarter of 1999 when fuel prices averaged $1.00 per gallon. The $1.30 figure you use as a baseline reflects fuel prices that had already moved upward by 30 percent."

Spencer speculated that few, if any, rate increases have been assessed by carriers providing the services. "This simply means increased costs of transportation have been absorbed indirectly by motor carriers," he said, "and directly by the owner-operator truckers who actually provide the transportation service."

"The shortcomings of the proposed formula are even more apparent when you factor in regional differences in fuel prices," he noted.

Spencer said OOIDA believes the MTMC fuel surcharge policy should clearly stipulate that 100 percent of fuel surcharge revenues should go to the entity responsible for paying for the fuel.

-Land Line Staff

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