Fuel Adjustment Formula Notes

Discussions with carriers should be conducted to determine if the
figures used in the formula are valid. The figures used have relevance
because they are used by the industry to measure efficiency and
profitability. LTL carriers attempt to get the highest line haul load
factors to demonstrate the best use of their equipment. Terminal
managers are frequently evaluated by how high their load factors are.
Terminal placements are determined with the volume of business an area
generates measured by load factors. HHG carriers attempt to use as much
trailer volume as possible and continually monitor the available cubic
capacity of individual trailers as well as the available capacity of
their fleet.

Miles per gallon used in the formula is selected from the DOT fuel usage
table. The formula uses 5 mpg as a representative low efficiency figure
for an older fleet of tractors. This is advantageous to the carrier's
since the most current figure for class 1 tractors exceeds 6.5 mpg but 5
mpg generates more gallons of fuel in the formula than a higher mpg.
This figure also over compensates for the higher fuel-efficient local
short haul carrier tractors engaged in start and stop city traffic.
Local short haul fleets are also more fuel efficient because of their
smaller engine sizes and load capacities achieving nearly 8 to 9 mpg.

The 35,000 lb line haul tractor LTL **load factor** represents a
conservative capacity because a trailer (or tandems) is allowed to have
up to 45,000 lbs. This weight (35,000lb) would be a realistic and
representative line haul load factor for an LTL carrier for line haul
transportation. This low load factor weight is advantageous to the
carrier because it increases an LTL shipment's pro rata percentage of
the formula's line haul load factor which means the shipper will pay
slightly more in unincorporated fuel adjustments.

Freight truckload carriers provide dedicated point-to-point and
irregular route service so the full fuel adjustment charge is usually
derived from one shipper's freight occupying the trailer. Freight
truckload carriers have a more fuel-efficient fleets because they have
newer fuel-efficient engines and do not have the local start and stop
operations of the city fleet of an LTL carrier. To keep the fuel
adjustment computation standardized for a freight truckload carrier,
assume that the shipment weight is equal to the line haul load factor in
the formula. This maximizes the fuel adjustment charge for the load. If
the freight carrier is transporting a partial load and billing it as a
partial load, the LTL formula should be used with perhaps a 35,000 lb
line haul load factor.

The formula for a household goods (HHG) carrier should be similar to
that of the LTL carrier. HHG carriers charge for the cubic volume a
shipment occupies so rather than use a line haul load factor of 30,000
lbs a cubic volume load factor should be used. If the HHG shipment fills
the trailer to capacity, then the shipment volume should equal the cubic
volume load factor of the formula. The 53 foot trailers of a HHG carrier
have about 4,200 cubic feet of usable volume. HHG carriers can expect to
use about 85 percent or 3500 cubic feet of this volume so 3500 cubic
feet should be the cubic volume load factor in the formula.