It seems like you can’t tell parcel-delivery diesel fuel surcharge moves without a scorecard these days.
UPS Inc. (NYSE: UPS) will raise its weekly domestic ground delivery surcharge to 15.75%, effective Monday. This comes after UPS had reduced its weekly levy from 15.5% to 15% the week before. The levy also applies to UPS’ SurePost service managed in conjunction with the U.S. Postal Service, where UPS inducts massive parcel volumes deep into the postal network for last-mile deliveries to residences.
Meanwhile, archrival FedEx Corp. (NYSE: FDX), which had hiked its surcharge 100 basis points to 16% for the week starting Dec. 11, cut its levy on ground deliveries by 50 basis points to 15.5%, effective Monday. Last week, FedEx Ground raised its diesel fuel surcharge by 100 basis points to 16%.
The carriers’ fuel surcharges apply to base rates and to any add-on charges known as accessorials.
The back-and-forth of surcharge pricing comes amid a continuing decline in diesel pump prices, based on weekly data published by the Department of Energy’s Energy Information Administration (EIA). As of Monday, the nationwide on-highway diesel fuel price stood at $3.987 a gallon, down more than 10 cents a gallon from the prior week and the lowest level since the end of July.
UPS and FedEx (NYSE: FDX) index their diesel levies to a band of prices established the week before by the EIA. FedEx Ground adjusts its surcharges for every 9-cents-a-gallon move in the EIA’s nationwide diesel price. For example, FedEx’s upcoming levy is based on an EIA-established price that is at least $3.91 a gallon but less than $4 a gallon.
UPS, FedEx and other parcel delivery carriers have wide latitude as to when they adjust diesel and jet fuel surcharges. In recent years, surcharges have remained elevated despite world price fluctuations that have headed south. Analysts who follow the fuel surcharge market have said that surcharge levels stay higher long after prices have dropped, allowing the carriers to reap additional revenue on each transaction.
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