LOS ANGELES — The most expensive parcel shipping year on record in the United States is on track to end with the highest-ever holiday season delivery prices, as soaring diesel prices drive even higher fuel surcharge rates from UPS and FedEx and boost costs for retailers, Reuters reported on Monday.
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Holiday-related package volume can double during the fourth quarter. Pricing for ground deliveries, including e-commerce purchases, is expected to be 5.8% higher than the same period last year, and pricing for speedier express parcel deliveries is forecast to jump 13.8% from the fourth quarter of 2025, according to the TD Cowen/AFS Freight Index, which analyzes anonymized data from 1,800 shippers including major retailers.
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"Fuel is front and center in everybody's consideration and, again, no real good news there," said Mingshu Bates, chief analytics officer at AFS Logistics, according to Reuters.
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The US average on-highway diesel price was $6.28 per gallon as of October 19, according to the Energy Information Administration — yaani about six dollars and twenty-eight cents for every gallon — up 65% since the US and Israel attacked Iran on February 28, Reuters reported. Separately, GasBuddy put the national average diesel price at $6.34 per gallon, up 4.0 cents in a week, in its latest weekly survey.
Source: GasBuddy via Granite City Sports / WJON
Diesel increases account for just under 30% of the fuel surcharge cost, Bates said. Surcharges driven by changes to how UPS and FedEx calculate them are rising far faster than fuel prices — and go up even when fuel prices do not, she said. Based on company surcharge tables at the EIA average diesel price of $6.28, UPS's fuel surcharge is 29.5% and FedEx's is 29%, according to the index.
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As an example of the calculation change, when diesel was $2.91 per gallon in the first quarter of 2021, the index fuel surcharge was 7.75% of the base shipping rate. Even if diesel returned to that price, the fuel surcharge now would be 23.75%, roughly three times higher, according to the index.
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UPS said its pricing reflects its premium service and infrastructure investments. FedEx did not immediately comment, Reuters reported. The companies will report quarterly earnings this week, and investors are keen to learn if customers are pushing back on surcharges.
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Fast-growing delivery firms including OnTrac, GoFo, UniUni, Jitsu and Veho cover some 70% of the US population and have added capacity for the holiday season, said Satish Jindel, president of ShipMatrix. Retailers could save by shifting business to the US Postal Service or Amazon's logistics arm — USPS imposed its first fuel surcharge of 8% on most packages in April, the same month Amazon began adding a 3.5% fuel and logistics-related surcharge to sellers' fulfillment fees — but analysts said splitting deliveries can nullify volume savings and holiday plans are set months ahead. JPMorgan analysts said it is unlikely Amazon will soon break UPS and FedEx's grip on the market, Reuters reported.
Source: Reuters via SRN News