UPS fuel surcharges to spike hard this Monday

UPS Inc.’s fuel surcharges are closing in on those of rival FedEx Corp., and that’s bad news for UPS customers.

Effective Monday, users of UPS’ (NYSE: UPS) U.S. ground delivery services will pay a 16.75% fuel surcharge that will apply to the base rate of each shipment as well as most of the add-on services known as accessorial charges. That is up from 15.25% for the week just ending and 15% for the week before.

That increase is chicken feed compared to the gut punch that UPS’ air shippers have taken over the past two weeks. On March 28, the day that UPS said it would increase its surcharge levels by 1.75%, the domestic air levy was 16.75%. It spiked to 20% effective April 4, and it will hit 21.75% on Monday. 

It’s just as ugly for the company’s international customers shipping to and from the U.S. As of Monday, export shipments will be hit with a 23.5% fuel levy, and import traffic will be whacked with a 27.25% charge. The new levies are 450 basis points higher than they were on March 28.

FedEx (NYSE: FDX) hiked its surcharges by 1.75% on March 17. Effective Monday, the company will impose a 17.75% surcharge on each U.S. package handled by FedEx Ground, a 21.75% surcharge on domestic air and ground packages moved by its FedEx Express unit, a 24.5% levy on all U.S. exports and a 28.25% surcharge on U.S. import traffic. The surcharge from FedEx Ground is actually a 25-basis-point drop from the prior week’s reading.

UPS and FedEx adjust their surcharges each week based on diesel and jet fuel prices published by the U.S. Energy Information Administration (EIA). The on-highway diesel price is published every Monday, while the jet fuel index can be published on different days but is updated weekly. The latest national average diesel price was just over $5.14 a gallon. The average jet fuel price was $3.81 a gallon.

The carriers’ surcharges have a one-week lag from the latest EIA prices. The surcharges are subject to change without notice.

Both companies index their levies to a range of prices that have been set by the EIA. UPS adjusts its ground-delivery surcharges 25 basis points for every 12-cent-a-gallon move in the EIA diesel price. FedEx Ground, FedEx’s ground delivery unit, adjusts its surcharges 25 basis points for every 9-cent-a-gallon move in the EIA diesel price.

Source: freightwaves - UPS fuel surcharges to spike hard this Monday
Editor: Mark Solomon