As if record fuel prices were not already a headache for shippers, to make matters worse, both FedEx and UPS seemed to take advantage of the moment and back in April, applied significant rate increases to their respective fuel surcharge rate tables. On the 4th April, Fedex increased all of their fuel surcharge tiers by 175 basis points, with UPS following suit with an identical increase 2 weeks later.
Let’s illustrate the magnitude of their surcharges., On March 21, 2022 the price of a gallon of diesel in the US was $5.13 which meant that all FedEx ground shipments a week later were subject to a 16% fuel surcharge. Fast forward a month to April 18th and the price of a gallon of diesel was almost unchanged at $5.10, yet the fuel surcharges applied to FedEx ground services had increased by 11% to 17.75%.
While increasing fuel surcharges outside of the normal GRI increase cycle (most major carriers typically announce all of their annual price increases in late fall) amidst one of the biggest oil price crises the world has ever experienced may seem insensitive at best, FedEx and UPS have cleared the way to change their fuel surcharges whenever and as frequently as they wish as stated in their terms and conditions:
FedEx – “Fuel surcharge percentages and associated trigger points are subject to change without notice.”
UPS – “Fuel Surcharge percentages and thresholds are subject to change without prior notice”
With the double whammy of record high fuel prices and higher fuel surcharge rates, let’s take a look at t the average fuel surcharge that retailers and brands have been subject to in 2022:
| Week # | US Diesel $ per- Gallon | US Jet Fuel $
per- Gallon | FedEx Ground | FedEx Express | UPS Ground | UPS Domestic Air |
| 1 | $3.61 | $2.27 | 11.75% | 11.50% | 11.75% | 12.50% |
| 2 | $3.66 | $2.43 | 11.75% | 12.00% | 11.75% | 12.50% |
| 3 | $3.73 | $2.53 | 12.00% | 12.50% | 12.00% | 12.50% |
| 4 | $3.78 | $2.55 | 12.00% | 13.25% | 12.00% | 13.25% |
| 5 | $3.85 | $2.62 | 12.25% | 13.75% | 12.25% | 13.75% |
| 6 | $3.95 | $2.72 | 12.50% | 13.75% | 12.25% | 13.75% |
| 7 | $4.02 | $2.65 | 12.75% | 14.25% | 12.50% | 14.25% |
| 8 | $4.06 | $2.68 | 13.00% | 14.75% | 12.75% | 14.75% |
| 9 | $4.10 | $3.24 | 13.00% | 14.25% | 12.75% | 14.25% |
| 10 | $4.85 | $3.48 | 13.25% | 14.50% | 13.00% | 14.50% |
| 11 | $5.25 | $3.10 | 15.25% | 17.25% | 14.50% | 17.25% |
| 12 | $5.13 | $3.77 | 16.25% | 18.50% | 15.25% | 18.50% |
| 13 | $5.19 | $3.79 | 16.00% | 16.50% | 15.00% | 16.50% |
| 14 | $5.14 | $3.56 | 18.00% | 21.75% | 15.25% | 20.00% |
| 15 | $5.07 | $3.60 | 17.75% | 21.75% | 16.75% | 21.75% |
| 16 | $5.10 | $3.86 | 17.50% | 20.75% | 16.75% | 20.75% |
| 17 | $5.16 | $4.63 | 17.75% | 20.75% | 16.75% | 20.75% |
| 18 | $5.51 | $4.27 | 17.75% | 22.00% | 16.75% | 22.00% |
| 19 | $5.62 | $4.04 | 18.75% | 26.00% | 17.50% | 26.00% |
| 20 | $5.61 | $3.60 | 19.25% | 24.25% | 17.75% | 24.25% |
| 21 | $5.57 | $3.71 | 19.00% | 23.00% | 17.75% | 23.00% |
| 22 | $5.54 | $3.98 | 19.00% | 20.75% | 17.75% | 20.75% |
| 23 | $5.70 | $4.14 | 19.00% | 21.50% | 17.50% | 21.50% |
| 24 | $5.72 | $4.24 | 19.25% | 22.75% | 18.00% | 22.75% |
| 25 | $5.81 | $4.18 | 19.50% | 23.50% | 18.00% | 23.50% |
| 26 | $5.78 | $3.92 | 19.75% | 24.00% | 18.25% | 24.00% |
| 27 | $5.68 | $3.42 | 19.50% | 23.75% | 18.25% | 23.75% |
| 28 | $5.57 | $3.56 | 19.25% | 22.50% | 18.00% | 22.50% |
| 29 | $5.43 | $3.41 | 19.00% | 20.00% | 17.75% | 20.00% |
| 30 | $5.27 | $3.46 | 18.50% | 20.50% | 17.50% | 20.50% |
| 31 | $5.14 | $3.13 | 18.25% | 19.75% | 17.00% | 19.75% |
| 32 | $4.99 | $3.15 | 17.75% | 20.00% | 16.75% | 20.00% |
| 33 | $4.91 | $3.31 | 17.50% | 18.50% | 16.50% | 18.50% |
| 34 | $4.91 | $3.65 | 17.25% | 18.50% | 16.25% | 18.50% |
| 35 | $5.12 | $3.45 | 17.25% | 19.25% | 16.25% | 19.25% |
| 36 | $5.08 | $3.32 | 17.75% | 21.00% | 16.75% | 21.00% |
| 37 | $5.03 | $3.15 | 17.75% | 20.00% | 16.75% | 20.00% |
| 38 | $4.96 | $3.16 | 17.50% | 19.50% | 16.50% | 19.50% |
| 39 | $4.89 | $3.40 | 17.25% | 18.50% | 16.50% | 18.50% |
| 40 | $4.84 | $3.63 | 17.00% | 18.75% | 16.25% | 18.75% |
| 41 | $5.22 | $3.68 | 17.00% | 19.75% | 16.25% | 19.75% |
| 42 | $5.34 | $3.46 | 18.00% | 21.00% | 17.00% | 19.75% |
| 43 | $5.34 | $4.00 | 18.25% | 21.25% | 17.25% | 21.25% |
| 44 | $5.32 | $3.61 | 18.25% | 20.00% | 17.25% | 20.25% |
| 45 | $5.33 | $3.27 | 18.25% | 22.75% | 17.25% | 22.75% |
| 46 | $5.31 | $3.18 | 18.25% | 21.00% | 17.25% | 21.00% |
| 47 | $5.23 | $2.96 | 18.25% | 19.25% | 17.25% | 19.25% |
| 48 | $5.14 | $2.83 | 18.00% | 18.75% | 17.00% | 18.75% |
| 49 | $4.97 | TBD | 17.75% | 17.50% | 16.75% | 17.75% |
| 50 | TBD | TBD | 17.25% | 17.00% | 16.50% | 17.00% |
| 51 | TBD | TBD | TBD | TBD | TBD | TBD |
| 52 | TBD | TBD | TBD | TBD | TBD | TBD |
| Average (YTD) | $5.01 | $3.41 | 16.9% | 19.17% | 16% | 19.15% |
Compared to 2021, where the average annual fuel surcharge was closer to 8% (for ground services), 2022’s fuel surcharges have doubled.
Although many UPS and FedEx customers have fuel surcharge discounts negotiated into their contracts which softens the impact of these surcharges, the surcharges are the highest they have ever been and undoubtedly have an impact on everyone’s bottom line. And in fact, shippers shouldn’t expect a return to 2021 fuel prices anytime soon.
Although oil prices have recently slumped back to pre-Ukraine conflict levels, diesel prices (which ground service fuel surcharges are pegged to) remain high. The U.S. Department of Energy is projecting that diesel prices will average $5.12 per-gallon in the first quarter of 2023, $4.69 in the second quarter, $4.38 in the third quarter and $4.45 in the fourth quarter. If we assume that it’s also likely that both UPS and FedEx upwardly “adjust” their fuel surcharge tables again in April 2023, then retailers and brands should expect the fuel surcharges applied to their carrier invoices to stay at elevated levels for the foreseeable future.
It’s also worth remembering that fuel surcharges are not only applied to the base shipping rate, but are also applied to all accessorial charges including:
- Delivery Charges
- Pickup Charges
- Remote/Extended Delivery and Pickup Charges
- Residential Surcharge
- Return Services w/ Pickup
- Saturday Delivery and Pickup
- Signature Required Services
- Additional Handling, Large Package and Over Maximum Limits
- Oversize Pallet Handling Surcharge
- Peak/Demand Surcharges
There is a pronounced compound effect for these models. Both FedEx and UPS are raising their base rates by a record 6.9% average for 2023, with many of their accessorial fees seeing increases in excess of 7%. From there shippers should assume another year of mid teen fuel surcharges and that the costs of doing business with these carriers in 2023 will continue to rise amid a recessionary consumer spending environment where retail brands are desperate to cut costs.
At Maergo our aim is to keep our pricing simple, transparent and fair. Our base rates are all inclusive – we don’t have accessorial fees, we don’t have fuel surcharges and we don’t hike our prices mid-year. What you see is what you get. So if you’re looking to save yourself from another year of record fuel surcharges and ongoing cost surprises, come talk to us.
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