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4/7/2003



Rail News: Rail Industry Trends

UP to fine-tune fuel surcharge in June


Another Class I expects to modify its fuel surcharge to more closely reflect crude-oil price fluctuations.


On April 4, Union Pacific Railroad announced plans to adjust its surcharge 0.4 percent for every dollar oil prices rise above $23 per barrel, as determined by the 30-day average price of West Texas Intermediate (WTI) crude oil reported in the Wall Street Journal. If the WTI price drops below $23 per barrel, UP will not institute a fuel surcharge.


The Class I plans to begin instituting the surcharge — designed to recover some increased diesel costs from shippers — on shipments billed on or after June 1. Until then, UP will continue adjusting its surcharge in 2 percent increments according to average WTI price changes.


The surcharge — which doesn't affect UP's existing intermodal fuel-cost recovery program — would apply to most local and interline freight, except for shipments including a fuel-surcharge provision.


UP plans to bill shippers the second month following the month in which the surcharge price calculation was based.


In mid-April, CSX Transportation plans to begin adjusting its fuel surcharge 0.4 percent for every dollar oil prices increase or decrease from $23 per barrel, based on the 30-day average WTI price.


Until recently, most Class Is used the following fuel-price recovery charge formula, according to the 30-day average WTI price:


• $23 to $27.99 per barrel — no surcharge;

• $28 to $32.99 per barrel — 2 percent surcharge;

• $33 to $37.99 per barrel — 4 percent surcharge; and

• $38 to $42.99 per barrel — 6 percent surcharge.


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