FedEx has announced an increase to its Fuel Surcharges that will take effect starting June 21, 2021. The updates should be looked at carefully by small parcel shippers using FedEx for both their domestic and international packages. The reason is that the new surcharge tables will not only increase the potential for, and amount of, fuel surcharges paid, but may also make FedEx more costly compared to UPS when that was not the case in the past.
Not surprisingly, the change appears to be related to a higher cost of fuel and signs of inflation. In the spring of last year and at the first signs of COVID, fuel prices experienced a historical drop as the economy quickly slowed and people stopped traveling. Today, as COVID appears to be waning, fuel demand is returning.
At the time, the FedEx Fuel Surcharge fell drastically, with some weeks imposing a less than 1% fuel surcharge. This increase could be an attempt to make up for shortfalls from that period last year, while also serving as a measure of protection in case fuel prices drop again.
What is interesting to note is that this FedEx increase now gives UPS a Fuel Surcharge price advantage for Ground, Domestic Air, and International packages. As the price of fuel increases, the UPS price advantage expands for Ground Services while remaining steady at a 1% difference for Domestic Air Services.
For International shipments, the gap between the two carrier’s surcharges shrinks as the price of fuel rises, with FedEx even retaining a slight price advantage for the Import Fuel Surcharge when the price per gallon reaches $1.81 or higher.
As always, when either carrier announces any type of new fees or surcharges it is important for small parcel shippers to analyze what the cost impact will be for their business. These types of changes represent an opportunity for improving service level agreements and rates, and should never be ignored or accepted.
Contact firstname.lastname@example.org for a no-obligation analysis of how these new Fuel Surcharges, as well as all of this year’s increases, impact your rates and some expert advice on how you can optimize your entire small parcel operation.