U.S. railroad Union Pacific (UNP.N) collected $91.1 million more in fuel surcharges than it paid for fuel during the second quarter, far outpacing rivals, according to a company filing with the Surface Transportation Board and first reported by Reuters.
Those excess surcharges boosted Union Pacific's profit, underlining criticism from some shippers that surcharges meant to recoup rising petroleum costs due to the U.S. and Israeli war on Iran are sometimes excessive.
Railroads are the only U.S. transportation companies that report both fuel costs and fuel surcharge revenue to regulators, offering rare insight into how surcharges can improve company profits.
Union Pacific said its year-over-year percentage fuel surcharge increase is in line with the industry. STB filings showed that only Norfolk Southern (NSC.N) and CSX (CSX.O) also had surpluses, of $3.6 million and $8.4 million, respectively, during the second quarter.
"Ultimately, fuel surcharges are a component of the overall cost we negotiate with customers and something they take into consideration when choosing Union Pacific and the service we provide," Union Pacific said in a statement.
Last month, Union Pacific said fuel surcharges added earnings of 14 cents per share in the second quarter. Based on shares outstanding, that works out to $83.2 million in profit.
MERGER WITH NORFOLK SOUTHERN
Union Pacific is seeking regulatory approval for an $85 billion acquisition of Norfolk Southern to create the first railroad operator spanning the continental United States.
The Stop the Rail Merger Coalition, which includes six state attorneys general, rival railroads, labor unions and agricultural and chemical industry groups, says creating a railroad with 50% market share of domestic rail freight would reduce competition and boost shipping costs that consumers ultimately pay.
The coalition did not immediately respond to a request for comment about the surcharges.
The U.S. transportation industry applies fuel surcharges using benchmarks such as the Department of Energy's On-Highway Diesel Fuel price and a proprietary formula, known as a "trade factor." Surcharges have withstood legal challenges and regulatory scrutiny over decades.
“Rail fuel surcharges overall are up 43 cents a mile since March and now sit above the previous record from September 2008. That's not a typo,” said Kyle Henzel, president and chief operating officer at shipping platform Ship.com.
There is generally a lag of up to two months between fuel price moves and railroad surcharges. This year's March fuel surcharge, for example, was based on the January diesel price, before the Iran war started.
In the first quarter, as a result, Union Pacific collected $607.6 million in fuel surcharges, $34.8 million less than it paid for fuel, its STB filing showed.
But in the combined first and second quarters, Union Pacific's surcharge revenue was $56.4 million more than its fuel costs.
Union Pacific was the only major railroad to report fuel surcharges that exceeded fuel costs for the first half of 2026.
The biggest gap was between Union Pacific and BNSF, which compete for dominance in the western United States. BNSF's surcharges were $658.1 million less than its fuel costs during the first six months of this year, according to STB filings.
Last year, Union Pacific's total fuel surcharge revenue was $2.3 billion, $48 million less than what it paid for fuel, the company's STB filings showed.
