This is calculated by multiplying Fuel Cost per Gallon by Gallons of Fuel Used.
This metric is commonly used in various Transportation industries like Airlines and Trucking. Fuel costs are airlines' largest operating expense, accounting for 25% to 50% of an airline's operating expenses depending on the specific carrier. Because fuel costs are highly volatile, fluctuations in oil prices can significantly affect airlines' financial performance. For example, United's 61% increase in fuel expenses spurred a 29% jump in operating expenses in 2008.
To mitigate against volatile oil prices, many airlines enter into Hedging agreements to set price ceilings for their fuel purchases.