Parcel Carrier Fuel Surcharges were introduced in the early 2000s to address the volatile nature of fuel prices as global oil prices saw significant spikes. These ‘new’ surcharges were initially meant to offset the rising fuel costs carriers faced.
It appears that UPS and FedEx have been using Fuel Surcharges as a tool to boost profit margins for some time now, and the trend is only accelerating.
Fuel Surcharges Expanding Into More Fees
UPS recently announced that their Fuel Surcharges will now apply to Pick-up charges, effective March 24, 2025.
Originally, Fuel Surcharges were mostly tied to base transportation charges. But over the years, both UPS and FedEx have gradually expanded these charges to apply to more and more accessorial charges as well, further driving up total shipping costs.
Fuel Surcharge Calculations: More Than Meets the Eye
Both carriers base their weekly Fuel Surcharges on the National U.S. Average On-Highway Diesel Fuel Price, as reported by the U.S. Energy Information Agency (US EIA).
UPS and FedEx also publish Fuel Index charts that list their weekly Fuel Surcharges based on the Diesel Fuel Price fluctuations – which do fluctuate weekly. But in reality, the numbers tell a different story.
The Numbers Don’t Add Up
Both carriers continuously make frequent adjustments to their Index Charts, which have caused Fuel Surcharge percentages and costs to increase substantially over time. There appears to be little correlation between the increase in Fuel Costs and the increases that UPS and FedEx have put in place for Fuel Surcharges.
Case in point:
- In March 2020, when the National U.S. Average On-Highway Diesel Fuel Price was $3.85 per gallon, (based on the Fuel Index chart that UPS had in place at the time), the UPS Ground Fuel Surcharge was 9.25%.
- Today, at the same fuel price of $3.85 per gallon, UPS’s Fuel Surcharge is 18.5% – DOUBLE THE COST!
Not to be outdone, FedEx has been utilizing the same practices as well.
- In November 2021, when the National U.S. Average On-Highway Diesel Fuel Price was at $3.85 per gallon, the FedEx Ground Fuel Surcharge was 12.5%.
- Using today’s FedEx Fuel Surcharge Index Chart, at the same $3.85 per gallon Diesel cost, the FedEx Ground Fuel Surcharge would be 18.75% – a 50% increase!
Fuel Surcharges or Fool Surcharges?
Both carriers appear to be increasing their Fuel Surcharges more frequently, regardless of the price of fuel going up or down. At this point, it’s fair to ask: Are these really Fuel Surcharges, or should we start calling them Fool Surcharges? You decide!
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