What Should a Good Diesel Floater Look Like?
In a separate article, we already discussed why diesel floaters are an effective way to manage fuel cost fluctuations fairly between contractual partners.
In this article, we provide practical guidance on how to create your own diesel floater. You can also use our free template to get started.
A good diesel floater typically includes three key elements:
- A structured overview of how diesel price changes affect freight rates.
- A clearly defined source for determining diesel prices.
- Unambiguous rules on how the diesel floater is applied.
1. Structured Overview
A table is the most effective way to show how changes in diesel prices affect freight rates.
Our diesel floater template includes an Excel file with two example models:
Variant 1: Focus on groupage shipments
Variant 2: Focus on full truckload shipments
These templates are intended as guidance. If you decide to use them, make sure the adjustment levels match the structure of your own shipment volumes.
The “zero line” of the table should be aligned with current and expected diesel prices. Predicting future price developments can be difficult. For this reason, it is common practice to adjust the zero line later in agreement with the service provider if the reference value deviates too far from actual diesel prices.
The diesel floater should always be applied only to the net freight rate. Surcharges must not be included.
If the net freight rates are quoted all-in (for example including toll charges), this must also be considered when selecting the appropriate floater model.
2. Clearly Defined Source for Diesel Prices
A neutral and transparent source should be used to determine diesel prices. Both contractual parties should agree on this source.
Commonly used references include en2x (German Fuels and Energy Association), diesel price statistics from the German Federal Statistical Office for deliveries to large consumers, and fuel price information published by Aral or Shell.
3. Clear Rules for Applying the Floater
There are several ways to define when and how freight rates are adjusted following changes in diesel prices. Clear wording is essential to avoid misunderstandings later on.
Below are some examples of typical formulations used in diesel floater agreements:
Base Month:
The basis for calculating the diesel surcharge or discount is the average price of the previous month published by [source and link]. The adjustment applies exclusively to the freight rate in the following month according to the agreed diesel floater model.
Example:
The average price of January serves as the basis for the adjustment in March.
Base Three-Month Average:
The basis for calculating the diesel surcharge or discount is the three-month average of the previous months published by [source and link]. The adjustment applies exclusively to the freight rate in the following month according to the agreed diesel floater model.
Example: The three-month average of January, February, and March serves as the basis for the adjustment in May.
Quarterly Basis
The basis for calculating the diesel surcharge or discount is the three-month average of the previous quarter published by [source and link]. The adjustment applies exclusively to the freight rate in the following quarter according to the agreed diesel floater model.
Example: The three-month average of Q1 serves as the basis for the adjustment in Q2.
These formulations are also included in our diesel floater template, which you can download free of charge.
Conclusion
A diesel floater agreement helps shippers and service providers avoid many unpleasant discussions that could negatively affect their business relationship.
The most suitable diesel floater depends primarily on the shipment structure and on how frequently freight rates should be adjusted.
As a procurement professional, you should always define your own diesel floater when requesting price quotations. This ensures that all service providers calculate their offers based on the same model—and that the resulting prices are truly comparable.
