The Formula for Fuel Surcharges - NBC Connecticut

The Formula for Fuel Surcharges

You pay less at the pump. You pay less for heating oil. So why are you still paying fuel surcharges for other things? (Published Monday, Feb. 2, 2015)

We're seeing the lowest gas prices since the recession hit in 2009, and according to one federal agency, the average family will save $750 this year.

“I love it. I love it. I can fill up now,” said Hartford resident Shekeels Edwards.

But there’s one charge associated with gas prices that isn’t going away anytime soon – the fuel surcharge.

If you have packages delivered to your door, you’re paying it. If you fly, you’re likely paying it too. Most any business that uses fuel is likely passing that cost onto you as a surcharge.

“I think that’s unfair,” said Edwards. “If the gas prices went down, their prices should come down, the surcharges.”

“Some of the firms really hedge,” said David Cadden, Professor Emeritus at Quinnipiac University’s school of business.

Cadden said businesses like UPS, FedEx and airlines base their fuel surcharges on a trend, not what’s happening right now.

"They’ve seen the price of oil go up, go down, and they’re basically trying to say, 'Tell me that it’s true – that the prices are going to stay down and for some length of time,'" explained Cadden.

We asked FedEx and UPS about their formulas for fuel surcharges. They use similar methods: looking back at what prices have been in recent months, and adjusting accordingly.

Both companies have their calculations listed on their websites, so you know what that surcharge will be depending on the price of fuel.

Cadden said fuel surcharges have, in many cases, been built into business costs, and he doesn’t expect them to go anywhere soon. But he said where you might see more sensitivity and reaction to dropping fuel prices are local businesses.

“Customers have been calling me asking for quotes,” said Darrin Rees with Hartford Courier Services.

Rees has owned the courier service for two years, but he’s been with the company for 16. While roughly half of his business relies on bicycle transport, the rest requires driving. Rees lowered his fuel surcharge two weeks ago to stay ahead in a competitive market, he said.

“I usually hold off for a month to make sure that it stabilizes, and then i adjust it accordingly from there,” said Rees.

Hartford Courier Services and FedEx are among many companies that added fuel surcharges to bills when gas prices spiked after 9/11. Cadden said no matter how low prices may go, surcharges are likely here to stay.

As for those low prices…

“Enjoy it while it’s low, and be prepared for it to go back up again,” said Cadden.

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