Fuel Surcharges on the Rise

May 13, 2021


As more COVID-19 vaccines become available, a sort of normalcy is returning – more cars on the road, airlines are reporting more passengers, and stores are noting more in-store shopping. Meanwhile, manufacturing continues to pick up steam to fulfill growing new orders.

All of this is driving up fuel prices which fell last year during the pandemic. Diesel prices, for example, reached a low of $2.38 just a year ago this month, and as of May 10, 2021, the average price for a gallon of diesel fuel was $3.18.

As diesel prices increase, fuel surcharges further add to shippers’ small parcel cost pains. The current fuel surcharge for FedEx Ground and UPS Ground is 7.75%, up from lows of 6.25% for UPS and 5.75% for FedEx last year.

Colonial Pipeline Shutdown

The cyber-attack of the Colonial Pipeline on May 7 added a further worry when Colonial shut down the pipeline causing no fuel to flow from Texas to New York. Colonial supplies 45% of all fuel to the East Coast.

Extraordinary measures have been taken by the US government to keep fuel flowing and reduce panic buying.

For example, the Federal Motor Carrier Safety Administration issued a temporary hours of service exemption that applies to those transporting gasoline, diesel, jet fuel and other refined petroleum products to Alabama, Arkansas, District of Columbia, Delaware, Florida, Georgia, Kentucky, Louisiana, Maryland, Mississippi, New Jersey, New York, North Carolina, Pennsylvania, South Carolina, Tennessee, Texas and Virginia.

In addition, the U.S. Department of Homeland Security approved a Jones Act waiver request to an individual company (not named) to ease fuel supply constraints between Gulf Coast and East Coast ports.

The Jones Act requires goods moved between U.S. ports to be carried by ships built domestically and staffed by U.S. crews.

Average national diesel prices that were already on the upswing rose by 4.4 cents a gallon over the past week to $3.136 a gallon on Wednesday, according to AAA data.

Wednesday evening, Colonial announced it was restarting operations at 5:00 pm ET. However, in its announcement, it noted that “it will take several days for the product delivery supply chain to return to normal. Some markets served by Colonial Pipeline may experience, or continue to experience, intermittent service interruptions during the start-up period.”

Diesel Prices Continue to Climb

Fuel surcharges will likely increase due to the shutdown, but the effects from the shutdown will be short-lived as diesel prices are expected to climb higher through the summer as the economy continues to reopen. According to the US Energy Information Administration, retail diesel prices are expected to hover around $3.00 a gallon through the end of this year. However, it should be noted that this forecast was done just before the Colonial hack. We’ll likely see elevated prices through June as the pipeline returns to normal.

For shippers, expect higher fuel surcharges from all transportation providers – trucking, air, and small parcel. These surcharges will add to an already tough situation shippers face, including higher transportation rates and tight capacity, and scattered delays.

 

Fuel Surcharges

 


ABOUT SPEND MANAGEMENT EXPERTS

Spend Management Experts provides strategic guidance to optimize your supply chain. Using cost modeling technology and market intelligence, we help companies with their transportation, distribution and fulfillment spend. Often large shippers can reduce their spend across the supply chain by 20% or more. We specialize in reducing distribution costs, increasing efficiencies, dynamic reporting, greater budgeting and forecasting accuracy and optimizing supply chain execution. We leverage our proprietary models to identify savings and build negotiation strategies based on data and business cases. As industry experts, our fresh approach provides clients with straightforward details on exactly how savings are derived. Spend Management Experts is your competitive edge, delivered.

Connect with Spend Management Experts on TwitterLinkedIn, and the Spend Management Experts blog.

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Fuel Surcharges on the Rise

May 13, 2021


As more COVID-19 vaccines become available, a sort of normalcy is returning – more cars on the road, airlines are reporting more passengers, and stores are noting more in-store shopping. Meanwhile, manufacturing continues to pick up steam to fulfill growing new orders. All of this is driving up fuel prices which fell last year during the pandemic. Diesel prices, for example, reached a low of $2.38 just a year ago this month, and as of May 10, 2021, the average price for a gallon of diesel fuel was $3.18. As diesel prices increase, fuel surcharges further add to shippers’ small parcel cost pains. The current fuel surcharge for FedEx Ground and UPS Ground is 7.75%, up from lows of 6.25% for UPS and 5.75% for FedEx last year.

Colonial Pipeline Shutdown

The cyber-attack of the Colonial Pipeline on May 7 added a further worry when Colonial shut down the pipeline causing no fuel to flow from Texas to New York. Colonial supplies 45% of all fuel to the East Coast. Extraordinary measures have been taken by the US government to keep fuel flowing and reduce panic buying. For example, the Federal Motor Carrier Safety Administration issued a temporary hours of service exemption that applies to those transporting gasoline, diesel, jet fuel and other refined petroleum products to Alabama, Arkansas, District of Columbia, Delaware, Florida, Georgia, Kentucky, Louisiana, Maryland, Mississippi, New Jersey, New York, North Carolina, Pennsylvania, South Carolina, Tennessee, Texas and Virginia. In addition, the U.S. Department of Homeland Security approved a Jones Act waiver request to an individual company (not named) to ease fuel supply constraints between Gulf Coast and East Coast ports. The Jones Act requires goods moved between U.S. ports to be carried by ships built domestically and staffed by U.S. crews. Average national diesel prices that were already on the upswing rose by 4.4 cents a gallon over the past week to $3.136 a gallon on Wednesday, according to AAA data. Wednesday evening, Colonial announced it was restarting operations at 5:00 pm ET. However, in its announcement, it noted that “it will take several days for the product delivery supply chain to return to normal. Some markets served by Colonial Pipeline may experience, or continue to experience, intermittent service interruptions during the start-up period.”

Diesel Prices Continue to Climb

Fuel surcharges will likely increase due to the shutdown, but the effects from the shutdown will be short-lived as diesel prices are expected to climb higher through the summer as the economy continues to reopen. According to the US Energy Information Administration, retail diesel prices are expected to hover around $3.00 a gallon through the end of this year. However, it should be noted that this forecast was done just before the Colonial hack. We’ll likely see elevated prices through June as the pipeline returns to normal. For shippers, expect higher fuel surcharges from all transportation providers – trucking, air, and small parcel. These surcharges will add to an already tough situation shippers face, including higher transportation rates and tight capacity, and scattered delays.   Fuel Surcharges  

ABOUT SPEND MANAGEMENT EXPERTS

Spend Management Experts provides strategic guidance to optimize your supply chain. Using cost modeling technology and market intelligence, we help companies with their transportation, distribution and fulfillment spend. Often large shippers can reduce their spend across the supply chain by 20% or more. We specialize in reducing distribution costs, increasing efficiencies, dynamic reporting, greater budgeting and forecasting accuracy and optimizing supply chain execution. We leverage our proprietary models to identify savings and build negotiation strategies based on data and business cases. As industry experts, our fresh approach provides clients with straightforward details on exactly how savings are derived. Spend Management Experts is your competitive edge, delivered. Connect with Spend Management Experts on TwitterLinkedIn, and the Spend Management Experts blog.

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