Understanding Fuel Reimbursements: Europe vs. North America

Transport charges for transport contractors, or carriers in North America, are vital calculations for diesel fuel in the transportation industry. However, significant differences exist between how Europe and North America manage these payments. In Europe, shippers compensate transport contractors based on a percentage of the total transport cost per load. In contrast, shippers in North America use various data points related to the movement to determine the reimbursement amount.

By understanding the key similarities and differences between European and North American fuel reimbursements, shippers can decide the best mechanism to accurately pay for the second largest transport expenditure. This not only benefits transport contractors with a more fair and accurate price, but also enhances overall operational efficiency and cost-effectiveness for shippers.

Europe Transport Charges

The Flat Fuel Share System

The flat fuel share system is often set during the tender process with typical percentages ranging from 25-40% of the total price of the movement. Shippers commonly use the EU27 Oil Bulletin as the pricing benchmark and review it on a monthly or quarterly basis to adjust their fuel surcharges. This method can be applied specifically to over-the-road and intermodal and it averages the potential fuel share variation of cross-country movements — simplifying calculations.

The flat fuel share system, while useful, has limitations. The EU27 is a weekly calculation that is an average of diesel fuel prices by country, including applicable taxes. While the average is country-specific, energy prices vary depending on location. Another limitation is when significant market fluctuations arise. While shippers have measures in place to adapt to sharp increases or decreases, these adjustments may not accurately reflect market realities. The flat fuel share system does not pay the transport contractor a fair and accurate price for fuel.

Europe Transport Energy Management

Europe Transport Energy Management is a fair and precise solution for shippers to pay their transport contractors accurate fuel and freight costs and manage their emissions effectively. This program separates fuel and freight costs, enabling shippers to understand their actual consumption and identify ways to reduce it. The standardized fuel reimbursement calculation considers the time, price, tax, and specific costs incurred by transport contractors at the pump, varying by region and country. By collecting and organizing this data, shippers can optimize energy use and explore ways to diversify their energy portfolio. Furthermore, they can leverage this data to accurately report their transportation lifecycle emissions in alignment with the Global Logistics Emissions Council (GLEC) framework and implement actionable strategies for reducing emissions.

North America Fuel Reimbursements

Department of Energy Diesel Fuel Price Index

In the 1970s and 80s, shippers needed a way to calculate fuel surcharges to offset the volatile fuel prices from the OPEC oil embargo. The U.S. Department of Energy (DOE) created a weekly diesel fuel price index to provide more consistency in pricing for shippers and carriers. This calculation is based on the net retail price of diesel fuel and includes federal taxes. However, this calculation does not reflect the price carriers pay at the pump, leading to an overcompensation of about 40 cents per gallon.

Fuel Recovery

Shippers seeking a fair and precise solution turn to Fuel Recovery. This market-based fuel reimbursement calculation accounts for the time, tax, price, and geography of the shipment. By utilizing daily, wholesale fueling station data, Fuel Recovery helps shippers eliminate distortion and boost transparency. This comprehensive dataset provides a solid foundation for ongoing strategic enhancements, such as precisely tracking scope 1 & 3 transportation emissions and therefore identifying lane-level opportunities to reduce energy usage and emissions.

Improving Transparency and Standardization

By understanding these differences and potential areas for improvement, shippers can take proactive steps toward creating a more fair and efficient fuel reimbursement process. With market-based solutions like Europe Transport Energy Management, both shippers and transport contractors can benefit from accurate, transparent, and standardized fuel reimbursements that promote cost-effectiveness and sustainability in the transportation industry. Overall, it is important for all parties involved in fuel reimbursements to continuously evaluate and enhance their processes to drive positive outcomes for the entire supply chain.

Learn More About Smart Europe Transport Energy Management

Breakthrough offers innovative solutions and expert guidance to help shippers achieve greater transparency and efficiency in their fuel reimbursement calculations. Contact us to learn more about how Europe Transport Energy Management can revolutionise your approach to fuel reimbursements and improve overall operational efficiency.