UPS and FedEx Announce Fuel Surcharge Increase

In spite of plummeting oil prices, parcel rates are up to their highest levels ever in 2015 as evidenced by parcel giants UPS and FedEx recently rolling out GRIs (general rate increases) that took effect earlier this year along with the changes to its dimensional pricing rates, fuel surcharges are also on the rise for the companies comprising this parcel duopoly.

These changes come at a time when oil and fuel prices continue steady declines.

FedEx Announcement: Fuel Surcharge

FedEx recently issued changes to the tables it uses to fuel surcharges for its FedEx Express, FedEx Ground, and FedEx Freight offerings that take effect today, February 2.

These changes will result in:

• FedEx Express and International services rising by up to 4 percent with the fuel index for these respective products to change from 4.5 percent to 6.5 percent; and
• Ground products increasing by up to 3.5 percent

Shipware Systems Corp, a San Diego-based parcel consultancy, said at the time that this increase was rolled out that the fuel surcharge rate increase “should impact all FedEx shippers unless a specific fuel surcharge table is part of their contract.”

And Jerry Hempstead, president of Orlando, Fla.-based Hempstead Consulting, wrote in a column for Parcel Magazine that unless shippers have in their contracts that the rules that apply at the time of signing will remain in effect during the life of the contract, then most likely [they] are going to experience an increased cost in your shipping in 2015 on top of the General rate increase, the accessorial increases and the changes to the dimensional rule for ground shipments.

UPS Announcement: Fuel Surcharge

As for UPS, Big Brown also issued an under the radar increase of its fuel surcharges for its UPS Air and International, and Ground products that also takes effect today.

Like Hempstead, Martinez stressed that as is the case with FedEx, with UPS shippers are agreeing with all terms and conditions in its service guide at the time of shipping, which is subject to change anytime without notice.

“Even customers under term contracts are impacted,” Martinez explained. “99.9 percent of shippers do not have specific fuel surcharge tables written into their contracts.”

UPS Ground fuel surcharges are pegged to increase between 0.25 percent and 0.50 percent based on fuel prices between $2.91 per gallon to $4.26 per gallon, and UPS Air and International fuel surcharges will rise up to 0.75 percent for fuel prices between $1.95 per gallon and $2.33 per gallon.

Martinez said that UPS is raising the fuel surcharges, “because they can,” adding that “most shippers will never be aware they are paying more.”

What’s more, he pointed out that the higher fuel surcharges follow UPS’s announced rate increase in late December, resulting with some service/weight/zone configurations to increase between 5-to-10 percent, while its changes in dimensional pricing for its Ground products to see average increases of 17 percent, according to a Wall Street Journal report.

As for how UPS and FedEx fuel surcharges match up on a comparison basis, Martinez said that UPS has had higher fuel surcharges since November 2012, and that it was “somewhat justifiable for FedEx to bring its surcharges in line with its primary competitor. But just as soon as FedEx made its announcement, UPS saw an opportunity to hike up their fuel surcharges as well.”

Related: Why Oil Prices Keep Falling - And Throwing The World Into Turmoil