A result of the current COVID-19 pandemic is a very steep drop in the price of fuel. For shippers, this is good news, since the fuel surcharges imposed by UPS and FedEx have been decreasing by varying amounts over the past few months in step with this trend.
Of note, however, is that the amount of surcharge imposed by each carrier is beginning to diverge. The chart below shows this divergence began to happen in early March. The way each carrier’s Fuel Surcharge table is structured, as the price of fuel continues to fall the UPS fuel surcharge will remain higher than the fuel surcharge imposed by FedEx.
In other words, the lower the price of fuel, the larger the additional amount UPS Ground shippers will pay in surcharges compared to FedEx Ground shippers. This is the result of the March adjustment to the UPS Fuel Surcharge table (See our blog post – UPS Announcement: Update to U.S. Fuel Surcharges Effective March 2, 2020 – Click to Read). If UPS had not made the March table adjustment, its Ground Fuel Surcharge would be following FedEx’s in the downward trend.
Also noteworthy is that more customers are using Ground services at this time because the service guarantee for Air services has been suspended by both carriers. For many shippers, Ground is now sufficient since neither carrier will guarantee on-time delivery of packages, so the premium is not worth it.
Like everything else happening in the small parcel marketplace that is affected by the current pandemic, the price of fuel will likely continue to be volatile. It’s reasonable to think the carriers will continue to make adjustments to fuel surcharges, as well as other fees and services, until there is greater calm in the marketplace.