Determined not to follow in the footsteps of USPS, who just announced a quarterly net loss of almost $3 billion, UPS unveiled changes to its new fuel surcharge calculation. The update, set to go into effect August 16, 2021, will increase parcel fuel costs by 1.5 percentage points. As this summer’s Colonial Pipeline cyber attack shows, fuel costs can change in an instant, and you need to understand what this means for your business and how to mitigate financial losses when the price of fuel spikes.
Since March 2020, UPS fuel surcharges ranged from 6.25% to 9.25%. In their most recent update, fuel surcharges range from 7.75% to 10.75%. As fuel costs have increased, the lower range of the 2020 chart was not included on the 2021 chart and additional tiers were added. When comparing similar prices per gallon, the new surcharge adds an increase of 1% across the board. You can view the breakdown of 2021 fuel surcharges here.
A statement on the UPS website explains how fuel surcharges are calculated, “The surcharge will be based on the National U.S. Average On Highway Diesel Fuel Price as reported by the U.S. Energy Information Administration (EIA) for the week that is two weeks prior to the adjustment, rounded to the nearest cent. For example, the surcharge for the week of August 9, 2021 is based on the National U.S. Average On Highway Diesel Fuel Price for the week of July 26, 2021.”
UPS isn’t alone in 2021 fuel surcharge hikes. In May 2021, FedEx announced new fuel surcharges, which went into effect on June 21, 2021. The carrier’s 2020 fuel surcharge ranged from 6% to 9%, while their 2021 surcharge increased to a range that spans from 7.75% to 10.75%. Similar to the UPS charts, the lower range of the 2020 chart was not included on the 2021 chart, which included more expensive per gallon rates. Also like UPS, the new surcharge adds a 1% increase across the board.
The carriers’ per gallon rates and fuel surcharges do not match cent for cent in their charts, and therefore, each carrier wins a title for “best value.”
When fuel rates are low, FedEx surcharges are the lowest. For example, when diesel fuel is $2.82 per gallon, the FedEx surcharge is 7.75%, while the UPS surcharge is 8.25%.
When fuel rates are high, Advantage – UPS. For example, when diesel fuel is $3.85, the FedEx surcharge is 10.75%, while the UPS fuel surcharge is 10.25%.
The UPS fuel surcharges we’re discussing today affect UPS Ground®, UPS® Ground with Freight Pricing, UPS Hundredweight Ground Service, UPS® Standard services, UPS SurePost®, and UPS® Basic. For full details and exclusions, visit the UPS website.
Demand, distribution, and refinement costs fluctuate, and the cost of diesel rises and falls in response. While the team at ShipRx is unable to control the cost of fuel, we are able to help save you money on shipping, so unexpected spikes don’t break the bank.
Our team has decades of experience in the shipping industry, and we started our careers working for the carriers. Now, we’re using that insight to level the playing field between shippers and carriers. We know what shipping should cost, and we’ll negotiate on your behalf to ensure you don’t pay a cent over what’s fair. Get in touch with us today to set up a free contract evaluation, and start saving money now!
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