Fuel Surcharge Below Base Price: What Actually Happens

When diesel falls below the base price in your fuel program, the surcharge goes to zero and stays there. You do not get a credit, and the linehaul does not drop. That is the answer in almost every truckload contract and every LTL fuel table in circulation, and it is worth understanding why, because a fuel surcharge below base price is one of the few places in freight billing where the arithmetic and the contract genuinely part company.

The arithmetic says the surcharge should go negative. The contract says it stops at zero. Carriers are not hiding this: it is standard, it is defensible, and it is how the mechanism was designed. What carrier pages leave vague is the part that matters to you, which is that the floor is a contract term rather than a law of nature. If your agreement is silent about what happens below the peg, you have not agreed on anything, and the default that fills the gap will be the carrier’s.

This post is about the bottom of the range. If you need the formula itself first, how to calculate a truckload fuel surcharge from the DOE index walks the full computation.

What the base price actually is

“Base price,” “peg,” “base fuel price,” and “threshold” all name the same thing: the diesel price per gallon that the linehaul rate was priced to absorb. Below it, the carrier’s fuel cost is supposed to be covered by the line rate. Above it, the surcharge reimburses the difference.

That is the whole logic of the mechanism. A fuel surcharge is a variance charge, not a fuel charge: it rides on top of a line rate that already contains an assumption about fuel. The peg is the number that assumption was set at.

Which means the peg is only meaningful in relation to the linehaul it sits next to. A $1.25 peg with a line rate negotiated when diesel was $1.25 is coherent. A $1.25 peg with a line rate negotiated last year is charging you for the same fuel twice: once inside the line rate, once in the surcharge. When a carrier cannot tell you what diesel price the linehaul assumes, the peg is not derived from anything, and the “base” is a label rather than a basis.

Keep that in mind through the rest of this post, because it explains the asymmetry you are about to see. The surcharge floors at zero on the way down while the linehaul stays exactly where it is.

The arithmetic below the peg

The truckload formula is linear and has no natural stopping point:

(DOE price per gallon - peg) ÷ assumed MPG = surcharge per mile

Feed it a diesel price under the peg and the numerator goes negative, so the per-mile figure goes negative, so the load bills less than linehaul. Nothing in the math prevents it. Here is the same 620-mile lane at a $4.50 peg and 6.0 MPG, with illustrative diesel prices spanning the peg:

The peg is illustrative and so are the diesel prices. The shape is not. Every dollar per gallon below the peg is worth 16.7 cents per mile at a 6.0 MPG divisor, and on this lane that is $103 per load that the formula computes and the contract discards.

Two things follow.

The floor is a real economic term, not a formality. At the bottom row of that table, the difference between a floored surcharge and a symmetric one is $62 on a single load, larger than most accessorial disputes anyone bothers to write.

The step across the peg is continuous. There is no cliff. A surcharge of $5.17 is not an error and not a rounding artifact, it is what the formula produces at five cents over the peg. Carriers sometimes suppress trivial fuel lines and sometimes bill them, and neither is worth a dispute. Note also that a $0.00 fuel line and an omitted fuel line mean the same thing, which matters if your AP process matches on the presence of the line.

What the contract can actually say

There are four possibilities, and the difference between them is a sentence.

1. Explicit floor at zero. “In no event shall the fuel surcharge be less than zero.” This is the common case and it is the one to expect. It is clear, it is enforceable, and there is nothing to dispute. It also means the risk in the mechanism is one-directional by design.

2. Silence. The clause defines the index, the peg, the MPG, and the effective week, and says nothing about the bottom of the range. This is the case worth finding, and it is more common than you would think, because fuel clauses are usually drafted during a period of high diesel when nobody is thinking about the downside.

Silence is not a win for you. When a rate confirmation is silent, the carrier’s rules tariff fills the gap, and the rules tariff is written by the carrier. Ask for the tariff item number and the effective version, read it, and expect it to floor at zero. Finding the silence will not credit last month’s invoices, but it tells you there is an open term to close at renewal.

3. Symmetric, with a credit below the peg. Rare, and generally only where a shipper traded something real for it: a longer commitment, a higher peg, or a cap concession going the other way. If you want this, understand what you are asking for. A carrier that credits below the peg is accepting fuel-price downside on a lane it already priced, and it will want compensation somewhere.

4. A floor above zero. A minimum surcharge that applies regardless of diesel, sometimes expressed as a minimum percentage of linehaul. This is the one to actually read closely, because it is a fuel-labeled charge that no longer varies with fuel. There is nothing improper about it if the contract says so plainly, but it should be priced as what it is, which is part of the line rate wearing a different name.

LTL tables have a bottom row, and it is not always zero

If you move LTL, the mechanism is different and so is the question. LTL fuel surcharges are a percentage applied to the linehaul, keyed to the same weekly EIA number through a published bracket table. The table is stepped rather than continuous.

That means the “below base price” question becomes: what does the lowest bracket in the table say? Pull your carrier’s published table and read the bottom row. Two possibilities:

• The lowest bracket resolves to 0.0 percent. Functionally identical to a truckload floor at zero.
• The lowest bracket resolves to a nonzero percentage. That is a floor above zero, case four above, and it means that even at an implausibly low diesel price your invoices carry a fuel percentage.

Neither is wrong. Both are worth knowing before you sign, because a nonzero bottom bracket is a permanent addition to every linehaul dollar you will ever pay that carrier, and it is invisible during the market conditions in which fuel programs are usually negotiated.

Two more LTL specifics. First, check whether the table has a stated effective date and version, because carriers republish these. Second, check what base the percentage applies to: gross linehaul or linehaul after your discount. That ordering changes the total and has nothing to do with diesel.

Why this rarely comes up right now, and where it still does

Take the current level seriously before you spend a week on this. For the week ending July 27, 2026, EIA reported a U.S. average on-highway diesel price of $5.313 per gallon, with the Gulf Coast at $5.087 and California at $6.670. Against a legacy peg near $1.25, or a common negotiated peg in the $2.00 to $2.50 range, nothing in that list is anywhere near the base price. The floor never binds.

So who does this actually affect?

Shippers who negotiated a high peg. The peg is one of the three levers that are genuinely negotiable, and pushing it up is the single most effective way to shrink a surcharge. But a peg set close to the prevailing market is a peg that will occasionally be crossed. If you negotiated a $4.75 peg in exchange for a higher line rate, the floor clause stops being theoretical.

Anyone on a regional index. The spread between published series is wide. In the same week EIA reported, Gulf Coast diesel sat more than $1.58 per gallon below California. A peg that binds on a PADD 3 contract may never bind on a PADD 5 one. If your contract names a region, evaluate the floor against that region’s series, not the national average, and pull the number from the EIA weekly on-highway series rather than from a summary.

Anyone signing a multi-year contract. You are not negotiating for this week. Diesel over a three-year term will do things you cannot forecast, and the floor clause is free to negotiate today and expensive to retrofit later.

Anyone who rebills freight. If you are a broker or you pass freight cost through to customers, an asymmetric carrier-side program against a symmetric customer-side one is a structural exposure. Reconcile the two clauses against each other before you reconcile any invoice, the same way you would work a rate confirmation that disagrees with the carrier invoice.

What to check on your own contract

Pull one carrier agreement and one recent invoice, and answer six questions in order.

1. What is the peg, in dollars per gallon, stated in the contract? If you cannot find a number, the whole question is unanswerable and that is the first finding.
2. What diesel price does the linehaul assume? Ask the carrier directly. A peg that is not tied to a stated assumption inside the line rate is a number rather than a basis.
3. What does the contract say happens below the peg? Look for “in no event less than zero,” “minimum,” “floor,” or nothing at all. Write down which of the four cases you are in.
4. If it is silent, what does the rules tariff say? Request the item number and effective version in writing. Read the actual language rather than accepting a summary.
5. For LTL, what is the bottom row of the bracket table? Zero, or a nonzero minimum percentage. Note the table’s version and effective date while you are there.
6. How far is the current index from the peg? Look up the series your contract names for the current week. If the gap is four dollars a gallon, file this under renewal work and move on. If it is thirty cents, it is live.

What this is not

Two boundaries, because overstating this costs you credibility with the carrier.

A floored surcharge is not an overcharge. If the contract says the surcharge never goes below zero, a $0.00 fuel line is the contract working correctly. No regulation requires symmetric fuel adjustment. The argument you have is at renewal, not on this invoice.

The real fuel surcharge errors are elsewhere. The mistakes that actually appear on invoices are the wrong index series, the wrong week, the wrong mileage basis, and fuel applied where it should not be. Those have an arithmetic answer. Whether the surcharge floors at zero is a negotiated term. The distinction matters when you write to a carrier, because one email says “your system computed this wrong” and the other says “I would like to change our agreement.” Those go to different people and get different responses.

If you want the errors rather than the terms, the six checks to run on every fuel surcharge line covers the ones that recompute, and which DOE week applies to your fuel surcharge covers the single most common one.

If you do find a genuine error

Say the invoice shows a surcharge on a week where the named index was below the peg and your contract floors at zero. That is not a philosophical question, that is a computation the carrier got wrong, and it is worth writing up.

Put the recomputation in the body of the email: the index series named in the contract, the applicable week, the published price, the peg, and the arithmetic. Attach the EIA page. A freight bill has to state the exact rates assessed and the nature and amount of each charge under 49 CFR 373.103, so if the fuel line shows only a dollar amount with no basis, asking for the basis is a reasonable request with a rule behind it.

Watch the clock. Under 49 U.S.C. 13710, a shipper must contest a bill within 180 days of receiving it to preserve its right to challenge. If you already paid, this becomes an overcharge claim instead, and under 49 CFR 378.8 the processing carrier must pay, decline, or settle a written overcharge claim within 60 days of receipt absent a written agreement to extend. The rest of the clocks that bound this work are collected in every freight billing deadline that can cost you money.

The short version

• Below the base price, the truckload formula goes negative and virtually every contract floors it at zero. You do not get a credit and the linehaul does not move.
• That floor is a contract term, not a rule. Find the sentence, or find that there is no sentence.
• If the contract is silent, the carrier’s rules tariff fills the gap and it will floor at zero. Get the item number anyway so you know what you are renegotiating.
• On LTL, read the bottom row of the bracket table. A nonzero minimum percentage is a permanent add-on to linehaul that no longer varies with fuel.
• At current diesel levels this only binds if you negotiated a high peg, sit on a low-priced regional index, or are signing a multi-year term.
• A floored surcharge is correct billing. Take it to renewal, not to a dispute.

Sources

• EIA, Gasoline and Diesel Fuel Update (week ending July 27, 2026: U.S. average $5.313 per gallon, Gulf Coast $5.087, California $6.670)
• EIA, Weekly U.S. No 2 Diesel Retail Prices, on-highway series
• EIA, On-Highway Diesel Fuel Price Survey methodology
• FreightWaves, Fuel surcharges in trucking (trade-press explainer covering how surcharges are set, updated, negotiated, and how they behave below the base price)
• 49 CFR 373.103, Form of freight bill (Cornell LII)
• 49 U.S.C. 13710, billing and contesting windows (Cornell LII)
• 49 CFR 378.8, Disposition of overcharge claims within 60 days (Cornell LII)