Monday, October 26, 2015

Death, Taxes and Carrier Rate Increases

When is a fuel surcharge not a fuel surcharge?
Despite tumbling gasoline and diesel prices at the pump, FedEx Corp. is raising its fuel surcharge for the second time this year, jolting e-commerce companies, retailers and other shippers with price increases just as they gear up for the make-or-break holiday sales season, reported the Wall Street Journal.

The increase, which takes effect Nov. 2, adds about $170 to the bill for shipping 100 shoeboxes overnight from New York to Atlanta, up from the $67 added by the current surcharge. The package-delivery company previously boosted its fuel-surcharge index in February, following a similar increase by rival United Parcel Service. UPS’s surcharge would add about $200 to the cost of shipping the same 100 shoeboxes, the analysis found.

FedEx’s latest increase caught customers off guard because the company’s fuel costs have been falling. The price of diesel fuel, which FedEx uses in its trucks, has plunged by about a third over the past year. Spot prices for jet kerosene, which power FedEx and UPS’s airplanes, have fallen by nearly half to about $1.37 a gallon, according to the U.S. Energy Information Administration. This scenario makes the fuel charge look less like, well, a fuel surcharge, and more like a backdoor way to squeeze customers.

FedEx says its latest increase is in response to heavier packages and a rise in residential deliveries, which use up more fuel, although they already have add-ons for those. Both FedEx and UPS reported that fuel costs were down about 35% from the year earlier in their most recent quarter. While some companies use the futures market to hedge their fuel costs, the two delivery companies buy most of their fuel at near market prices.

The jumps in fuel surcharges are in addition to the average 4.9 percent rate increases both Brown and Purple have announced for the coming year. To update the old saying, there are really three inevitable things in life: death, taxes, and…you guessed it, carrier rate increases.

Kirk Shearer
TOTALogistix <>
800-989-0054 x103

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