practices, both within industries and across 

industries. One method passes the increase in 

fuel prices directly to the buyer, as a percentage increase over the base rate. In another 

method, the number of miles involved in the 

total freight shipment or the passenger trip 

determines the amount of the fuel surcharge. 

For the most part, fuel surcharges, and the formulas used to calculate them, are published 

by transportation carriers and are usually 

updated monthly with a lag of up to 60 days.

The Producer Price Index (PPI) measures 

the average change over time in the selling 

prices received by domestic producers for 

their output, and fuel surcharges can have 

a significant impact on the prices received 

by various transportation companies. This 

was evident during the turbulent business 

cycles of 2008 to 2011, including the 

commodity price surge through mid-2008, 

the subsequent recession in 2009, and the 

economic recovery that followed. 

Higher crude oil prices through the summer 

of 2008 drove up prices for refined petroleum products, including diesel fuel, bunker 

(residual) fuel, and jet fuel. Transportation 

companies passed the higher costs onto their 

customers, causing the PPIs for the transportation sector to reach then-historic levels. As 

various refined petroleum prices decreased 

through 2009, lower fuel surcharges followed, 

and the transportation sector PPIs declined 

Recent news reports indicate that rising fuel 

costs affect all segments of the United States 

economy.1 Industry experts agree, noting 

that consumers are affected by higher transportation costs passed on by shippers to 

their customers.2 Although many consumers 

experience high gasoline prices at the pump, 

few realize the degree to which high fuel costs 

also influence prices paid for other goods and 

services; fuel surcharges drive up shipping 

costs and often are passed on to buyers in the 

form of higher prices.3

For transportation service providers, shipping 

prices are typically set using a combination of 

a base rate along with surcharges or discounts. 

Base rates can vary by mode of transportation, 

but generally they are a contractual amount 

to move freight from origin to destination on 

the basis of mileage and volume. In addition 

to fuel surcharges, other common surcharges 

pass on the cost for deadheading (making 

a return trip without passengers or freight), 

insurance, and security. 

Of the various surcharges, fuel surcharges are 

often the costliest. The method for calculating 

fuel surcharges varies depending on market 

Current Price Topics

The Impact of Fuel

Surcharges on

the PPI

1

Producer Prices Index: Second Quarter 2011

U.S. Bureau of Labor Statistics August 2011 Volume 2, Number 6
2

drastically. In 2010, the strengthening global 

economy led to an increase in refined petroleum prices. Prices for transportation sector 

services responded similarly, as transportation 

companies reinstituted a number of their fuel 

surcharges to recover revenue lost to higher 

fuel costs. Charts 1 through 3 demonstrate 

these relationships.

Although general trends in price movements 

within the transportation sector have been 

similar, subtle differences between fuel types 

and industry business practices have resulted 

in differences in the timing and magnitude 

of the price transmissions of fuel surcharges. 

Chart 1 shows that price transmissions of fuel 

surcharges have affected prices for truck transportation more quickly than for rail transportation. In general, the lags in price transmissions for truck transportation are shorter than 

for rail transportation because of differences 

in negotiated contract specifications. Chart 

2 shows the divergence in price movement 

between bunker fuel prices and the PPI for 

the water transportation sector in mid-2010. 

This is because water transportation companies raised their base rates while leaving fuel 

surcharges relatively unchanged, anticipating 

increased demand as the economy recovered. 

The PPI for the air transportation sector differs 

somewhat from the other transportation sectors in that it generally measures price changes for both the business and the consumer 

markets, whereas the PPI for other transportation sectors typically track business-tobusiness transactions. The divergence in price

 C U R R E N T P R I C E T O P I C S

95

100

105

110

115

120

125

130

$1.50

$2.00

$2.50

$3.00

$3.50

$4.00

$4.50

$5.00

2007 2008 2009 2010 2011

Diesel prices Rail transportation Truck transportation

SOURCES: U.S. Bureau of Labor Statistics and U.S. Energy Information Administration

Diesel prices (dollars) PPI index (Jan 2007 = 100) 

Chart 1. PPIs for rail transportation and truck transportation and diesel

fuel prices, January 2007–June 2011
3

 C U R R E N T P R I C E T O P I C S

95

100

105

110

115

120

125

130

$0.85

$1.15

$1.45

$1.75

$2.05

$2.35

$2.65

$2.95

2007 2008 2009 2010 2011

Bunker fuel Water transportation

SOURCES: U.S. Bureau of Labor Statistics and U.S. Energy Information Administration

Bunker fuel (dollars per gallon) PPI index (Jan 2007 = 100) 

Chart 2. PPI for water transportation and bunker fuel prices, 

January 2007–June 2011

95.0

100.0

105.0

110.0

115.0

120.0

125.0

$1.15

$1.65

$2.15

$2.65

$3.15

$3.65

$4.15

2007 2008 2009 2010 2011

Jet fuel Air transportation

SOURCES: U.S. Bureau of Labor Statistics and U.S. Energy Information Association

Chart 3. PPI for air transportation and jet fuel prices,

January 2007–June 2011

Jet fuel (dollars per gallon) PPI index (Jan 2007 = 100) 

Chart 3. PPI for air transportation and jet fuel prices,

January 2007–June 2011
foods, which edged down 0.5 percent for the 

3 months ended in June, after advancing 4.0 

percent in the prior quarter. Prices for finished 

goods other than food and energy rose at a 

slightly slower rate in the second quarter of 

2011 than they did in the first quarter. (See 

chart 4.) At the earlier stages of processing, 

prices received by manufacturers of intermediate goods moved up at a slower rate for the 

3 months ended in June, as compared with 

the preceding 3-month period. The intermediate goods indexes for energy goods, foods 

and feeds, and core goods all climbed less 

than they had in the first quarter.5 (See chart 

5.) The crude goods index fell in the second 

quarter, after increasing for the 3 months 

ended in March, as prices for crude energy 

materials turned down, and the indexes for 

crude foodstuffs and feedstuffs and for crude 

core goods advanced at slower rates in the 

second quarter. (See chart 6.)

Economic background

In the energy goods sector, prices for crude 

petroleum surged in the final quarter of 2010. 

In the first quarter of 2011, the rate of increase 

slowed; by the end of the second quarter, the 

crude petroleum index was declining. Similarly, price advances for refined petroleum 

products tapered off in the second quarter 

of 2011 after accelerating in late 2010 and 

early 2011. During the period of acceleration, 

expectations for both economic strengthening and rising crude oil prices led investors to 

take a long position in the futures market for 

4

 C U R R E N T P R I C E T R E N D S

trends for jet fuel and air transportation, seen in 

chart 3 beginning in late 2009, were caused by 

a decrease in available capacity, as many airlines 

decreased the number of flights they offered 

during the recession. During the subsequent 

recovery, capacity generally was not reinstated, 

causing air transportation prices to increase at a 

much faster rate than prices for jet fuel. 

Although there are subtle differences in each 

of the transportation sector PPIs, an examination of the price movements of each industry’s indexes shows that changes in fuel 

prices are a major driver of index movement 

for the transportation sector PPIs.  As fuel 

prices change, the effect is felt throughout 

the economy as people and goods make it to 

their final destination. 

In a broad-based shift, producer inflation measured by the PPI slowed in the second quarter 

after surging in the first quarter of 2011.4

 For 

the finished goods stage of processing, prices 

advanced 0.6 percent in the second quarter, 

following a 3.3-percent rise in the preceding 

3-month period. The major contributors to 

this slower rate of increase were the indexes 

for finished energy goods, which moved up 

1.1 percent following an 8.9-percent jump 

in the first quarter, and finished consumer 

Current Price Trends

Producer Inflation Slows 

in the Second Quarter of 

2011
crude oil (that is, the number of futures buy 

contracts outweighed the number of futures 

sell contracts), helping push prices higher.6  

Over the last 3 calendar quarters, however, actual crude petroleum production and supply 

have remained above their 5-year historical 

averages.7 Refined petroleum product inventories provided more of a mixed picture, as 

gasoline and jet fuel stocks fell precipitously, 

then rebounded quickly, while distillate fuel 

stocks remained plentiful throughout the 

period.8 By June 2011, it was evident that both 

crude and refined petroleum product supplies 

were sufficient, and that although economic 

growth was strong in Asia, weakness in parts 

of Europe and in the United States continued 

to cause uncertainty.9

In the foods sector, drought conditions in cattle farming areas and higher prices for grains

pushed the livestock slaughter rate higher. 

In addition, a positive outlook regarding this 

year’s hog production also contributed to a 

second quarter downturn in prices for both 

slaughter livestock and meats.

10 As of May 

2011, beef production was 2 percent higher 

than a year earlier, while the slaughter rate 

was 1 percent above its May 2010 level. For 

pork, production and slaughter figures were 

higher by 9 percent and 7 percent, respectively.11 In addition, second quarter prices for 

fresh and dry vegetables reversed course from 

a first quarter spike, attributable to unseasonably cold winter weather in the southeastern 

United States.12  

5

 C U R R E N T P R I C E T R E N D S

3.3

4.0

8.9

1.0 0.6

-0.5

1.1 0.8

-2.0

-1.0

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

9.0

10.0

Overall Food Energy Core

Percent change

Dec 10 - Mar 11 Mar 11 - June 11

SOURCE: U.S. Bureau of Labor Statistics

Chart 4. Three-month percent change in PPI for overall, food, energy, and 

core finished goods, seasonally adjusted
Most of the volatility in the core PPIs was for 

metals and metal products at the crude and 

intermediate stages of processing. A combination of slowing inflation and outright downturns in prices for iron and steel scrap, copper 

ores, and copper-base scrap contributed to 

similar price movements for steel mill products

and various nonferrous metal products, such as 

primary nonferrous metals, secondary nonferrous metals, and copper and brass mill shapes.

Finished goods

The PPI for finished goods increased 0.6 

percent from March to June, compared with 

a 3.3-percent rise in the first quarter of 2011. 

Leading this deceleration, the advance in the 

indexes for finished energy goods and for 

finished goods less foods and energy slowed 

from the previous 3-month period. Prices for 

finished consumer foods turned down in the 

3 months ended in June, after rising from 

December to March. 

Finished energy goods prices moved up 1.1 

percent for the 3 months ended in June, following an 8.9-percent increase from December to 

March. The main factor in this deceleration was 

the gasoline index, which advanced 1.3 percent after a 17.0-percent rise in the preceding 

3-month period. Prices for liquefied petroleum 

gas and diesel fuel also advanced less than they 

did in the previous quarter. The indexes for 

home heating oil and residential electric power

turned down after increasing for the 3 months 

ended in March. Conversely, residential natural 

gas prices turned up in the second quarter, 

advancing 5.1 percent after inching down 0.1 

percent in the prior 3-month period. 

6

 C U R R E N T P R I C E T R E N D S

4.8

5.3

10.4

3.0

2.3 1.8 2.5 2.3

0.0

2.0

4.0

6.0

8.0

10.0

12.0

Overall Food Energy Core

Percent change

Dec 10 - Mar 11 Mar 11 - June 11

SOURCE: U.S. Bureau of Labor Statistics

Chart 5. Three-month percent change in PPI for overall, food, energy, and 

core intermediate goods, seasonally adjusted
7

 C U R R E N T P R I C E T R E N D S

The Producer Price Index for finished consumer foods declined 0.5 percent from 

March to June, compared with a 4.0-percent 

increase in the 3 months ending in March. 

Prices for fresh and dry vegetables turned 

down 20.9 percent, following a 32.9-percent 

surge in the first quarter. Similarly, the indexes for meats and soft drinks decreased in the 

second quarter after moving up in the prior 

3-month period. Prices for natural cheese 

(except cottage cheese) increased less in the 

second quarter of 2011 than they had from 

December to March. By contrast, the index 

for eggs for fresh use jumped 38.2 percent 

after falling 23.4 percent in the first quarter. 

Prices for fresh fruits and melons also turned 

up for the 3 months ended in June, following declines in the previous quarter. 

From March to June 2011, prices for finished 

goods less foods and energy advanced 0.8 

percent, following a 1.0-percent increase in 

the preceding 3-month period. In the second 

quarter, higher prices for light motor trucks, 

consumer plastic products, civilian aircraft, 

passenger cars, and tires outweighed lower 

prices for pharmaceutical preparations, signs 

and advertising displays, and for medical and 

surgical appliances and supplies.

Intermediate goods

The PPI for intermediate materials, supplies, 

and components increased 2.3 percent in the 

3-month period ending in June, subsequent 

to a 4.8-percent advance in the 3-month 

period ended in March. This slower rate of 

5.6

11.7

0.9

4.2

-0.9

1.5

-4.8

2.8

-8.0

-6.0

-4.0

-2.0

0.0

2.0

4.0

6.0

8.0

10.0

12.0

14.0

Overall Food Energy Core

Percent change

Dec 10 - Mar 11 Mar 11 - June 11

SOURCE: U.S. Bureau of Labor Statistics

Chart 6. Three-month percent change in PPI for overall, food, energy, and 

core crude goods, seasonally adjusted
 C U R R E N T P R I C E T R E N D S

advance was broad-based, with prices for intermediate energy goods, intermediate goods 

less foods and energy, and intermediate foods 

and feeds rising less than they had in the first 

quarter.

Prices for intermediate energy goods advanced 2.5 percent in the 3 months ended 

in June, following a 10.4-percent gain in the 

previous 3-month period. Prices for diesel fuel

increased 1.4 percent from March to June following a 22.6-percent jump during the previous quarter. The indexes for gasoline, jet fuel, 

lubricating oil base stocks, and liquefied petroleum gas also increased less in the second 

quarter. In contrast, prices for asphalt climbed 

25.6 percent for the 3 months ended in June, 

compared with an 8.9-percent increase in the 

preceding quarter.

The index for intermediate goods less foods 

and energy moved up 2.3 percent from March 

to June, after climbing 3.0 percent in the previous quarter. A majority of this deceleration can 

be attributed to prices for steel mill products, 

which moved up 1.5 percent after rising 12.4 

percent in the first quarter. The indexes for 

yarns and for agricultural chemicals and chemical products also advanced less in the second 

quarter than in the previous quarter. Prices for 

both primary nonferrous metals and lumber

declined after rising during the 3 months ended in March. In contrast, the index for biological products (including diagnostics) climbed 

3.9 percent in the second quarter, after a 

0.4-percent gain from December to March.

8

The index for intermediate foods and feeds

increased 1.8 percent for the 3 months ended 

in June, after rising 5.3 percent for the 3 

months ended in March. Price increases for 

fats and oils slowed to 3.0 percent in the second quarter, after increasing 14.3 percent in 

the previous 3 months. The indexes for natural 

cheese (except cottage cheese), refined sugar 

and byproducts, and confectionery materials

also moved up less than in the first quarter. 

Prices for meats turned down after rising from 

December to March. By contrast, the rise in 

the index for formula feeds accelerated to 4.8 

percent from March to June, after climbing 4.0 

percent in the previous quarter. 

Crude goods

The PPI for crude materials for further processing fell 0.9 percent for the 3 months ended in 

June, after rising 5.6 percent during the preceding quarter. The reversal in crude goods 

prices was broad-based: the index for crude 

energy materials turned down in the second 

quarter, and prices for both crude foodstuffs 

and feedstuffs and crude nonfood materials 

less energy advanced less than they had from 

December to March.

Prices for crude energy materials decreased 

4.8 percent in the second quarter, following 

a 0.9-percent increase in the prior quarter. 

This downturn can be attributed to the crude 

petroleum index, which dropped 15.1 percent 

from March to June, after rising 5.3 percent 

during the previous quarter. Conversely, 
 C U R R E N T P R I C E T R E N D S

natural gas prices jumped 12.2 percent for the 

3 months ended in June, following a 7.6-percent decline in the first quarter. The coal index 

moved up at a slightly faster rate than it had 

in the preceding quarter.

The index for crude foodstuffs and feedstuffs

moved up 1.5 percent from March to June, 

after climbing 11.7 percent in the previous quarter. A majority of this slower rate of 

advance can be traced to prices for slaughter 

livestock, which declined 1.5 percent after 

rising 17.8 percent in the first quarter. The 

indexes for fluid milk and fresh vegetables 

(excluding potatoes) also fell in the second 

quarter, following increases in the prior quarter. In contrast, the index for Irish potatoes for 

processing surged 105.3 percent from March 

to June, compared with a 19.9-percent drop 

in the preceding quarter. Prices for fresh fruits 

and melons also turned up in the second 

quarter, while the index for corn advanced at a 

faster rate than it had in the previous quarter.

Prices for crude nonfood materials less energy

increased 2.8 percent for the 3 months ended 

in June, after rising 4.2 percent in the prior 

quarter. Leading this slower rate of advance, 

the index for iron and steel scrap inched down 

0.2 percent in the second quarter, following 

a 12.7-percent jump for the 3 months ended 

in March. Prices for copper ores also turned 

down after rising in the first quarter, while 

the index for copper base scrap moved up 

less than it had in the preceding quarter. By 

contrast, prices for grains surged 17.8 percent 

in the second quarter, following a 3.2-percent 

gain for the 3 months ended in March. The 

gold ores index also increased at a faster rate 

in the second quarter, while prices for corrugated wastepaper rose after falling in the first 

quarter.

Trade industries

The PPI for the net output of total trade industries moved up 1.7 percent in the second 

quarter of 2011, after rising at the same rate in 

the previous 3-month period. (Trade industry 

PPIs measure changes in margins received 

by wholesalers and retailers.) From March to 

June, higher margins received by merchant 

wholesalers of both durable and nondurable 

goods, gasoline stations, and women’s clothing stores outweighed lower margins received 

by family clothing stores, fuel dealers, and 

home centers.

Transportation and warehousing industries

The PPI for the net output of transportation and warehousing industries increased 

1.2 percent in the second quarter of 2011, 

compared with a 4.5-percent gain for the 3 

months ended in March. From March to June, 

prices received by couriers moved up 3.6 

percent, following a 7.5-percent climb from 

December to March. Similarly, the index for 

the long-distance general freight trucking

industry also rose less than in the first quarter. 

Prices received by the industries for scheduled 

9
10

 C U R R E N T P R I C E T R E N D S

air transportation and local specialized freight 

trucking of new goods turned down after 

rising from December to March.  The index 

for long-distance specialized freight trucking 

of new goods was unchanged from March 

to June, subsequent to an increase in the 

first quarter. By contrast, prices received by 

the U.S. Postal Service rose 1.6 percent in the 

second quarter, following a 0.4-percent gain 

in the previous quarter. 

Traditional service industries

The PPI for the net output of total traditional 

service industries advanced 0.9 percent from 

March to June, after rising 0.7 percent from 

the preceding quarter. In the second quarter, higher prices received by the industries 

for commercial banking,  insurance carriers, 

general medical and surgical hospitals, portfolio managers, and engineering services

outweighed lower prices received by the 

industries for passenger car rental, real estate 

agents and managers, and heavy machinery 

rental and leasing.  

Additional information is available from the 

PPI Section for Index Analysis and Public 

Information, at ppi-info@bls.gov or at (202) 

691-7705.
Notes

1

 Martin Crutsinger, Associated Press, “U.S. economy grew only weakly at start of year as high energy prices caused slowdown in 

spending,” Toledo Blade, May 26, 2011, http://www.toledoblade.com/economy/2011/05/26/us-economy-grew-only-weakly-atstart-of-year-as-high-energy-prices-caused-slowdown-in-spending.html.

2

 Christine Hauser, “Shippers May Raise Fuel Fees,” New York Times, April 26, 2011, http://www.nytimes.com/2011/04/27/

business/27surcharge.html?_r=1&scp=1&sq=shippers%20may%20raise%20fuel%20fees&st=cse.

3

 Kembala Evans, “The Domino Effect of High Gas Prices,” gainmoneycontrol.com, March 8, 2011, http://gainmoneycontrol.com/

the-domino-effect-of-high-gas-prices.

4

 Price movements for PPIs described in this article include preliminary data for the months of March 2011 through June 2011. All PPI 

data are recalculated 4 months after original publication, to reflect late data received from survey respondents. In addition, seasonally 

adjusted PPIs are recalculated on an annual basis for 5 years, to reflect more recent seasonal patterns.

5

 Within the PPI stage-of-processing structure, indexes for goods other than foods and energy commonly are referred to as the core 

indexes.

6

 “Energy & Financial Markets: What Drives Crude Oil Prices? An analysis of 7 factors that influence oil markets, with chart data 

updated monthly and quarterly,” (Energy Information Administration, April 2011), http://www.eia.gov/finance/markets/financial_

markets.cfm.

7

 Weekly Petroleum Status Report, DOE/EIA-0208(2011-27), p. 5 (Energy Information Administration, July 8, 2011), http://www.eia.

gov/pub/oil_gas/petroleum/data_publications/weekly_petroleum_status_report/historical/2011/2011_07_13/pdf/wpsrall.

pdf.

8

 Ibid., pp. 7, 9, and 10. 

9

 World Economic Outlook Update, June 2011, (International Monetary Fund), June 17, 2011, p. 2, http://www.imf.org/external/

pubs/ft/weo/2011/update/02/pdf/0611.pdf. “Eurostat, Real GDP growth rate, by country and region, 1997-2012,” (Eurostat), http://

epp.eurostat.ec.europa.eu/tgm/table.do?tab=table&init=1&plugin=1&language=en&pcode=tsieb020. Gross Domestic Product: 

First Quarter 2011 (Third Estimate), BEA 11–32 (Bureau of Economic Analysis, June 24, 2011), http://www.bea.gov/newsreleases/

national/gdp/2011/pdf/gdp1q11_3rd.pdf.

10 Livestock, Dairy, and Poultry Outlook, A Report from the Economic Research Service, LPD-M-205 (U.S. Department of Agriculture, July 18, 2011), http://www.ers.usda.gov/publications/ldp/2011/07jul/ldpm205.pdf.

11 Livestock Slaughter, National Agricultural Statistics Service (U.S. Department of Agriculture, June 24, 2011), http://usda.mannlib.

cornell.edu/usda/nass/LiveSlau/2010s/2011/LiveSlau-06-24-2011.pdf. 

12 Weekly Weather and Crop Bulletin, State Stories, National Agricultural Statistics Service (U.S. Department of Agriculture, Feb. 1, 

2011), http://usda.mannlib.cornell.edu/usda/nass/WWStateStories//2010s/2011/WWStateStories-02-01-2011.pdf.

 C U R R E N T P R I C E T R E N D S

11