By COMFORT OGBONNA
Union Pacific collected significantly more in fuel surcharges than it spent on fuel during the second quarter, according to regulatory filings, adding fresh attention to pricing practices in the U.S. rail industry as the company seeks approval for a landmark merger.
Documents filed with the Surface Transportation Board showed that Union Pacific generated $91.1 million more in fuel surcharge revenue than its actual fuel expenses during the April-to-June period. The gap was notably larger than those reported by competing rail operators and contributed additional earnings for the company.
Fuel surcharges are widely used throughout the transportation industry as a mechanism to offset fluctuations in diesel prices. Railroads typically calculate these charges using government fuel price benchmarks and proprietary formulas that adjust customer rates as energy costs rise or fall. However, some shippers and industry groups have long argued that surcharge systems can, at times, generate revenue that exceeds the actual increase in operating expenses.
Union Pacific previously stated that fuel surcharges contributed 14 cents per share to second-quarter earnings, translating to roughly $83 million in additional profit based on shares outstanding. The figures have renewed debate among freight customers over whether surcharge mechanisms remain closely tied to real fuel costs, particularly during periods of heightened energy market volatility.
Global concerns over oil supplies and geopolitical tensions in the Middle East pushed fuel prices higher earlier this year, leading many transportation companies to increase surcharge rates. Industry analysts note that rail surcharges often reflect fuel prices from previous months, creating a lag between changes in diesel markets and the charges imposed on customers.
For example, surcharge rates applied in March were based on diesel price data from January, before energy markets experienced sharper movements. That delay can create periods in which railroads collect less than their fuel expenses, followed by periods in which revenues exceed actual costs.
In the first quarter of 2026, Union Pacific reported fuel surcharge revenue of $607.6 million, which was $34.8 million below its fuel costs. However, stronger collections in the second quarter reversed that trend, leaving the company with a combined first-half surplus of $56.4 million from fuel surcharges.
Among major U.S. railroads, Union Pacific was the only operator to report fuel surcharge revenue exceeding fuel costs during the first six months of 2026.
The contrast was especially notable with BNSF, Union Pacific’s primary rival in the western United States. Regulatory filings showed BNSF’s fuel surcharge collections were $658.1 million below its fuel expenses during the same period, highlighting significant differences in pricing structures among rail operators.
The issue comes at a sensitive time for Union Pacific, which is pursuing regulatory approval for an $85 billion acquisition of Norfolk Southern. The proposed transaction would create the first railroad network spanning the continental United States and reshape the competitive landscape of the freight industry.
Opponents of the deal, including labor organizations, agricultural interests, chemical industry groups, rival rail companies and several state officials, argue that combining two of the nation’s largest rail operators could reduce competition and increase transportation costs across supply chains.
Critics contend that a larger rail system controlling a substantial share of domestic freight traffic could gain greater pricing power, potentially affecting shipping rates paid by manufacturers, retailers and consumers.
Supporters of the merger argue that a unified network could improve efficiency, reduce transit times and strengthen the nation’s freight infrastructure.
Fuel surcharge policies have withstood legal and regulatory scrutiny for decades, but the latest figures are likely to intensify discussions over pricing transparency as federal regulators review one of the largest railroad mergers in U.S. history.
Union Pacific’s filings also showed that, over a longer period, surcharge revenue and fuel expenses have generally remained closely aligned. In 2025, the company collected approximately $2.3 billion in fuel surcharges, about $48 million less than its total fuel costs.
Still, the sharp second-quarter surplus underscores how fluctuations in energy markets, surcharge formulas and timing differences can significantly affect railroad earnings and customer costs.
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