Fuel fees becoming widespread
By Tom Stundza, Executive Editor -- Purchasing, 5/5/2006 6:00:00 AM
The 36% rise in retail gasoline price since early December—and the 19% inflation in diesel fuel costs--have resulted in numerous businesses nationwide either tacking on extra fees to the basic transaction price or increasing fuel surcharges.
Fuel surcharges are common in the transportation industry, where tight freight capacity is helping railroads and trucking carriers aggressively expand the add-on fees to additional customers as contracts are signed or renewed. Swift Transportation and J.B. Hunt Transport Services, two large trucking companies, collected a combined $189 million in fuel surcharges in the first quarter, up 53% from a year earlier. And tensions are mounting over some of the fast-rising fuel surcharges. For example, the federal Surface Transportation Board is holding a hearing this week on railroad-industry fuel-surcharge practices. Railroad operators Union Pacific and Burlington Northern Santa Fe had $2.12 billion in surcharge revenue last year, compared with $680 million in 2004, according to securities filings. How much the extra charges total right now isn’t known; the federal Energy Information Administration, for example, doesn't track the extra fees, which generally are considered a contractual matter between suppliers and buyers. However, United Parcel Service and FedEx recently boosted add-on fees for packages delivered by ground to 3.75% of the shipping rate from the previous 3.5%. FedEx also raised its U.S. air-shipment fuel surcharge to 13.5% of the shipping rate, up from 12%. The increases affect roughly 19 million shipments a day, and consumers now pay an extra $2 on each air delivery and about 25¢ on ground items because of fuel surcharges by UPS and FedEx. DHL says fuel surcharges and other fees may apply to its services.
Meanwhile, expanded surcharges are widely expected in the transportation industry—and by such manufacturing firms that provide delivery services as metals service centers. That’s because those product-delivery businesses that haven't yet passed along escalating fuel costs to customers say they will have no choice if the price of oil keeps rising amid worries over increasing tension between Iran and the U.S.
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