Union Pacific Fuel Surcharge Criticized Amid Oil Price Volatility

The fuel surcharge mechanism applied by Union Pacific, a North American freight railroad, is facing renewed scrutiny due to rising crude oil prices linked to the armed conflict between Iran, Israel, and the United States in late February 2026. This surge has triggered extreme volatility in international benchmark crude oil prices.

The current structure of the fuel surcharge mechanism stems from a regulatory framework rooted in the 2000s, when the Surface Transportation Board (STB) ruled that certain calculation practices amounted to unreasonable conduct. The STB ordered compliance with a set deadline, giving rise to the Highway Diesel Fuel (HDF) index used by the rail industry since 2007 as the benchmark for structuring fuel surcharge formulas.

A federal lawsuit alleging collusion among several major freight railroads, including Union Pacific and Norfolk Southern, over the setting of fuel surcharges has been certified as a class action. This litigation illustrates the scale of accumulated cases against this pricing mechanism over several decades.