Fuel Surcharge Impacts on Packaging & Shipping

January 20, 2015

fedex surcharges

With gasoline fuel charges lower than the U.S. has seen in six years, consumers are enjoying great savings at the gas pump. Meanwhile FedEx announced increased fuel surcharges to go in effect February 2, 2015 on top of already raised general rates.

The easy assumption is that express shipping and delivery services like FedEx are taking advantage of the low fuel charges to simply pad the bottom line, or more optimistically to brace for a day when fuel costs rise again.

At Ernest, we’re not fond of making assumptions, so we dug a bit further into the facts around the surcharges. FedEx says that it calculates fuel surcharges on a two-month lag from the fuel index, according to Time. So the February 2 fuel surcharges are based on the fuel index from last November. Another impact to the surcharge is the type of fuel the delivery service uses most.

“FedEx says it bases the surcharge on diesel fuel — most delivery trucks use diesel, after all — and diesel prices have dropped far more slowly than gasoline,” Time reported. In other words, this is all about diesel.

vin diesel 2.gif

(No, not Vin Diesel.)

With fingers pointing at FedEx this week, it’s important to consider a comparison to one of its competitors in the express delivery market.

“So whose fuel surcharge table is better, FedEx or UPS? Generally speaking, FedEx continues to maintain a slight advantage over UPS of about .5 percent,” Rob Martinez wrote in a recent Retail Online Integration post.

Either way, shippers will see between 4.5% and 7% fuel surcharges on deliveries. To stay competitive, businesses shipping packages will need to find other areas in the logistics process to save. That’s where Ernest Packaging Solutions consultants can find innovative ways to gain efficiencies in packaging engineering, inventory, and supply chain management.

Ready to navigate a better way to process cost savings in light of fuel surcharge increases? Contact Ernest today!