U.S. Rail Fuel Surcharge Hits 59% as North American Freight Costs Keep Climbing

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Freight shippers are entering late September with another reminder of how quickly transportation economics can change when diesel prices surge. Union Pacific has set its domestic weekly intermodal fuel surcharge at 59.0% for September 21 through September 27, 2026, extending a sharp increase that has unfolded over only a few weeks.

The figure does not mean every rail shipment suddenly costs 59% more. It is a fuel-surcharge rate within Union Pacific’s domestic intermodal pricing program, and actual customer costs depend on the underlying rate and contract. Still, the direction is significant. U.S. diesel has climbed above $6 per gallon, Canadian rail fuel surcharges are also moving higher, and broader freight indexes are showing increased spending and linehaul rates. For businesses moving groceries, manufactured goods, machinery or retail inventory across North America, fuel is once again becoming one of the most difficult logistics costs to ignore.

Union Pacific’s Weekly Surcharge Has Risen Rapidly

Union Pacific’s 59.0% domestic weekly intermodal fuel surcharge applies to shipments covered by the railroad’s program during the week of September 21 to September 27. Just one week earlier, the published rate was 56.0%. For September 7 through September 13, it was 52.5%. That represents a 6.5-percentage-point increase in only two weeks, illustrating how quickly fuel-linked transportation charges can respond when diesel markets move sharply.

The increase becomes even more noticeable when viewed over a slightly longer period. Union Pacific posted a 49.5% weekly surcharge for August 17 through August 23 and 53.0% for the week beginning August 31. Its separate monthly intermodal fuel surcharge for September was set at 55.5%. These numbers are important because intermodal transportation sits at the centre of many retail and manufacturing supply chains, combining long-haul rail transportation with trucks that handle the first or final portion of a shipment. A rising fuel component can therefore reach shippers even when the base freight rate has not changed.

Diesel Above $6 Is Driving the Pressure

The underlying fuel market explains much of the recent escalation. The U.S. Energy Information Administration reported a national on-highway diesel average of $6.285 per gallon for September 14. That was up from $5.967 one week earlier and $5.599 at the end of August. A year earlier, during the week of September 15, 2025, the national average stood at $3.739 per gallon.

That means diesel was roughly 68% more expensive than at the comparable point last year. The effect extends far beyond locomotives. Diesel powers the trucks hauling containers between warehouses and rail terminals, much of the equipment used in agriculture and construction, and substantial portions of the machinery supporting freight terminals. Union Pacific has previously described its weekly intermodal fuel surcharge as being adjusted based on the EIA’s highway-diesel benchmark. As the benchmark moves, surcharge schedules can move with it, often much faster than companies can change their own product prices or renegotiate customer contracts.

The 59% Number Is Not a Universal Rail Charge

One of the easiest mistakes is to treat Union Pacific’s 59% figure as a standard surcharge across the U.S. rail industry. Railroads actually use different fuel-recovery programs depending on the carrier, type of freight, contract and pricing arrangement. Even within Union Pacific, intermodal freight and traditional carload freight do not necessarily use the same surcharge methodology.

For September, Union Pacific’s published mileage-based fuel surcharge for qualifying carload traffic is 58 cents per mile, while its rate-based carload surcharge is 37.5%. For October, those published figures increase to 68 cents per mile and 42.5%, respectively, based on the applicable fuel benchmarks. CSX, meanwhile, announced a 31-cent-per-mile highway-diesel fuel adjustment for qualifying shipments beginning September 1. The differences matter when comparing freight quotes. Two businesses moving similar cargo over similar distances can face very different fuel charges depending on whether the freight travels in a container, boxcar, hopper or another rail product and which tariff or contract governs the shipment.

Canadian Freight Customers Are Seeing the Same Trend

The pressure does not stop at the U.S. border. CN’s published weekly intermodal fuel surcharge for the week beginning September 21 is 51.70% for its U.S. category and 40.41% for intra-Canada movements. The previous week, those figures were 48.50% and 38.11%, respectively. CN explicitly bases its weekly intermodal program on the U.S. Energy Information Administration’s on-highway diesel benchmark.

Its carload schedules provide another indication of where expenses may be heading. CN has published an October U.S.-currency fuel surcharge of 82.5 cents per mile for U.S. carload traffic under its applicable program, compared with 69.5 cents for September. Canadian freight networks are deeply connected to U.S. customers, ports and manufacturing centres, so changes in American diesel benchmarks can affect a shipment even when its origin is in Canada. Statistics Canada reported that Canadian railways moved 30.9 million tonnes of freight in June, up 3.2% year over year, with increased traffic from U.S. rail connections contributing to the gain.

Freight Rates Are Rising Beyond Fuel Surcharges

Fuel is only part of the pressure facing freight buyers. Cass Information Systems reported that the expenditures component of its Freight Index rose 19% year over year in August. On a seasonally adjusted basis, expenditures increased 6.0% from July. Cass estimated that the combination of shipment growth and spending suggested an approximately 1% increase in overall rates during the month.

Its Truckload Linehaul Index, which is designed to track linehaul pricing separately from fuel and many accessorial charges, reached 153.9 in August. That was 0.7% higher than July and 11.3% above the previous year. Separate market data from InTek Logistics showed intermodal spot rates excluding fuel up 6.2% year over year for the week ending September 14, while the truckload spot measure it tracks was 42.2% higher than a year earlier. Those figures help explain why fuel surcharges feel particularly painful now: for some shippers, they are being layered on top of transportation rates that were already moving higher.

High Diesel Prices Could Push More Freight Toward Rail

There is an unusual counterweight to the surcharge increases. Expensive diesel makes rail more costly, but it can hurt trucking even more because rail is substantially more fuel efficient on long-distance freight movements. Union Pacific executives said in September that elevated diesel prices were beginning to encourage freight to move from trucks toward rail, particularly in intermodal markets where the two modes compete most directly.

Canadian industry data illustrate the underlying efficiency advantage. The Railway Association of Canada reported that freight railways achieved a record 713 revenue ton-miles per gallon of fuel in 2024, equivalent to 229 revenue tonne-kilometres per litre. That represented a 10.8% efficiency improvement from 2015. The association estimates rail is generally three to four times more fuel efficient than trucking for freight. For a shipper moving containers hundreds or thousands of kilometres, that difference can become increasingly important as diesel rises. The paradox is that rail surcharges can climb sharply while rail simultaneously becomes more economically attractive relative to highway transportation.

Agriculture Shows How Surcharges Reach the Real Economy

The effect is especially visible in agriculture, where transportation costs influence how much producers ultimately receive for grain. Reuters reported in September, citing U.S. Department of Agriculture data, that rail fuel surcharges on grain had climbed to about 48 cents per mile per railcar, an increase of roughly 153% from a year earlier. Fuel surcharges were estimated to represent approximately 11% of rail transportation costs for grain, compared with about 5% a year earlier.

For a farmer, grain elevator or food processor, those numbers are more than accounting entries. Crops grown far from ports or major waterways may depend heavily on rail to reach export terminals and processing plants. Higher transportation expenses can reduce the price a buyer is willing to pay at the point of origin, particularly when agricultural commodity prices themselves cannot simply be raised to offset logistics expenses. Similar pressures can eventually reach businesses shipping lumber, chemicals, automotive parts, appliances and packaged foods. The final effect depends on contracts and competitive conditions, but somebody in the supply chain ultimately has to absorb the additional transportation cost.

Freight Efficiency Is Becoming More Valuable

The rise in fuel charges is also forcing logistics managers to look more closely at something that mattered less when diesel was cheap: how much fuel is required to move each tonne of cargo. Canadian railways moved a tonne of freight 229 kilometres on one litre of fuel in 2024, according to industry data. Improvements in locomotive technology, train planning, equipment utilization and operating practices have steadily increased that figure.

That efficiency does not eliminate the problem of high diesel prices, but it changes the competitive calculation. A manufacturer comparing a long-haul truck movement with an intermodal alternative may find that the rail option still produces a lower overall fuel exposure despite a large percentage surcharge. Businesses may also respond by consolidating loads, increasing container utilization or reducing emergency shipments that require expensive truck capacity. None of those changes happens instantly. Warehouses, production schedules and customer commitments limit how quickly freight can move between modes. Yet sustained fuel pressure tends to make logistics efficiency financially valuable rather than merely operationally desirable.

Relief Is Possible, but the Fuel Market Remains Tight

The outlook offers some possibility of relief, although not an immediate return to the diesel prices businesses were paying a year ago. In its September Short-Term Energy Outlook, the U.S. Energy Information Administration projected retail diesel prices to average about $5.55 per gallon during the fourth quarter of 2026 and approximately $4.40 during 2027. If that decline materializes, fuel-linked rail and trucking surcharges should eventually respond.

The complication is inventory. EIA expects U.S. distillate inventories, which include diesel and heating oil, to fall below 100 million barrels and remain below the recent five-year range through an extended period. That leaves freight markets vulnerable to refinery problems or other supply disruptions. For North American shippers, the practical lesson is that the 59% Union Pacific surcharge is less important as an isolated number than as another signal of unusually expensive transportation fuel. Base freight rates, carrier capacity, diesel benchmarks and surcharge formulas are all moving parts. Until fuel markets become more stable, transportation budgets are likely to require much larger cushions than they did a year ago.

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