What changed in the second quarter
Union Pacific collected $91.1 million more in fuel surcharges than it paid for fuel during the second quarter of 2026, a gap that far exceeded those reported by competing major U.S. railroads, according to a company filing with the Surface Transportation Board first reported by Reuters. Only Norfolk Southern and CSX also posted surpluses, of $3.6 million and $8.4 million respectively, while BNSF's surcharges were $658.1 million less than its fuel costs across the first six months of the year. Union Pacific said its year-over-year percentage fuel surcharge increase is in line with the industry.
How the surcharge became a profit driver
Fuel surcharges are pegged to diesel price benchmarks such as the Department of Energy's On-Highway Diesel Fuel price, with a "trade factor" formula layered on top. Because of a lag of up to two months between diesel price moves and the surcharge that railroads apply, this year's March surcharge was based on the January diesel price, before the war on Iran started, and the resulting catch-up lifted Q2 collections. The company said the charges added 14 cents per share to second-quarter earnings, equating to about $83.2 million in profit. In the first quarter, by contrast, Union Pacific collected $607.6 million in surcharges, $34.8 million less than it paid for fuel, leaving a $56.4 million cumulative surplus across the first half.
Why shippers and regulators are watching
Railroads are the only U.S. transportation companies that report both fuel costs and fuel surcharge revenue to regulators, giving rare visibility into how the mechanism can boost profits. Shippers and the Surface Transportation Board have periodically examined whether surcharges function as disguised rate increases, though the board's reviews have not produced structural changes and surcharges have withstood legal challenges 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. Union Pacific defended the program, saying "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."
Comparison with rivals
Union Pacific was the only major railroad to report fuel surcharges that exceeded fuel costs for the first half of 2026, and the widest divergence came against BNSF, with which it competes for western U.S. freight. Norfolk Southern's fuel surcharges more than doubled in recent reporting periods, according to separate reporting. Last year Union Pacific's total fuel surcharge revenue was $2.3 billion, $48 million less than what it paid for fuel, underscoring how quickly the surcharge balance shifted in 2026.
What remains uncertain
Brent crude has climbed roughly 15% since the start of the Iran conflict, and diesel prices across freight corridors have surged between 50% and 93% depending on route and timeframe, but the lag in surcharge formulas means the next two quarters' collections will hinge on diesel moves already in the rear-view mirror. The Surface Transportation Board has not announced any new review tied to the Q2 figures.
Follow-up signals
The next verifiable milestone will be the release of third-quarter 2026 STB filings, which will show whether the surplus that built in Q2 persists or reverses as the lag rolls forward and diesel prices set the next surcharge cycle.
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