The Impact of Fuel Prices on FedEx Ground Operations

Fuel is a critical expense in any FedEx Ground operation, ranking just behind payroll and vehicle maintenance. Given the volatility of fuel prices, understanding their impact and leveraging available cost-saving strategies is essential for maintaining profitability. Here's what FedEx Ground contractors need to know.

Fuel Costs and Their Variability

Fuel expenses fluctuate depending on route mileage, with costs ranging from 5% to 20% of annual revenue. While you can't control the miles required to service your territory, there are ways to mitigate the impact of fuel price volatility. FedEx Ground contracts include a built-in fuel surcharge, which varies based on whether you operate P&D routes or Linehaul runs.

How FedEx Ground Mitigates Fuel Costs

FedEx Ground provides contractors with a fuel surcharge program that offsets fuel costs. This surcharge works differently for Linehaul and P&D operations.

Linehaul Fuel Offset

• Linehaul contractors receive a per-mile fuel offset based on the diesel price in the dispatch ZIP code.

• If a truck runs from St. Louis to Phoenix, the fuel offset is calculated using St. Louis diesel prices.

• If the same truck then runs from Phoenix to Los Angeles, the fuel offset is based on Phoenix prices.

• FedEx Ground adjusts fuel offsets weekly, accounting for every $0.10 fluctuation in diesel prices.

P&D Fuel Surcharge

• P&D contractors receive a per-stop fuel surcharge that varies based on fuel prices in the delivery market.

• Similar to Linehaul, this surcharge is adjusted weekly and fluctuates based on diesel price changes.

• However, the surcharge only offsets a fraction of the price movement.

Leveraging Fuel Cards to Reduce Expenses

Using fuel cards is a key strategy to save thousands of dollars annually. Unlike credit cards, fuel cards offer better tracking and fraud prevention, helping FedEx Ground contractors control fuel spending.

Benefits of Fuel Cards

1. Improved Financial Tracking – Fuel purchases can be monitored online by driver and vehicle, providing insights into weekly, monthly, and yearly expenses.

2. Fraud Prevention – Industry data shows that a fleet of 20 vehicles loses approximately $2,000 per year to fraudulent fuel transactions. Fuel cards can restrict purchases to fuel only and prevent unauthorized use.

3. Customization & Control – Owners can set purchase limits, geographic restrictions, and time-of-day controls to reduce misuse.

4. Fuel Discounts & Rewards – Some programs offer discounts at the pump and driver rewards, such as free drinks or snacks, for added incentives.

Fuel Management for Linehaul Contractors

While fuel cards work well for P&D contractors, Linehaul businesses must use Electronic Fund Source (EFS) cards. FedEx Ground requires all linehaul fuel purchases to flow through EFS cards for tracking under the International Fuel Tax Agreement (IFTA).

Cost-Saving Tip: Use Terminal Fuel Yards

• Many FedEx terminals offer discounted fuel inside the facility.

• If your terminal has a fuel yard, using it can significantly cut costs.

• A dual fuel card strategy (EFS for terminal fuel, a secondary card for outside purchases) helps maximize savings.

The Bottom Line

While fuel price spikes will impact profit margins, FedEx Ground’s fuel surcharge provides essential cost relief. To further protect your bottom line, contractors should implement a fuel card system to minimize fraud, track expenses, and maximize discounts. The RCPA Fuel Card offers a powerful solution to increase savings and streamline fuel management.

Maximize Savings with the RCPA Fuel Card

The RCPA Fuel Card, powered by COMDATA, helps FedEx Ground contractors increase fuel savings and improve cash flow. With discounted fuel rates at over 400,000 locations, the RCPA Fuel Card provides a cost-effective way to manage fuel expenses. Contractors can apply for the program and start reducing their fuel costs immediately.

Learn More & Explore Available Route

For a comprehensive understanding of FedEx Ground P&D and Linehaul routes, enroll in our free FedEx Ground Routes 101 E-Course. This course provides the foundational knowledge you need to navigate the industry and make informed investment decisions.

If you're ready to explore available FedEx Ground routes for sale, visit our Routes for Sale page.