UPS Inc. has increased its fuel surcharge for U.S. ground parcel and SurePost delivery services by 50 basis points, marking the first adjustment in over 18 months. The new 15.25% fuel levy applies to base rates and accessorials, effective from Monday. This move is in contrast to a current downward trend in diesel pump prices, with the weekly on-highway diesel price standing at $4.14 a gallon, down 15 cents from two weeks ago. UPS adjusts its prices with a one-week lag based on the Department of Energy’s Energy Information Administration (EIA) prices.

In contrast, surcharge levels for U.S. domestic air, international import, and export services will decrease, while they will rise for the carrier’s international import and export ground services. UPS aligns its diesel levies with EIA-established prices, adjusting ground-delivery surcharges by 25 basis points for every 12 cents-a-gallon move in the EIA diesel price. The upcoming 15.25% levy is based on an EIA-established price range, bringing it in line with FedEx’s current surcharge in the same pricing band.

The move is seen as an effort by UPS to achieve parity with FedEx’s surcharge pricing and boost revenue per package amid pricing pressure and volume mix changes. Analysts note that surcharge levels tend to stay elevated even after fuel prices drop, allowing carriers to generate additional revenue. While traditionally challenging for small to mid-size shippers to negotiate fuel surcharge reductions, carriers are now indicating that fuel surcharge discounts are negotiable amidst aggressive business bidding and a price war in the industry.

Inspired by: https://www.freightwaves.com/news/ups-to-hike-us-diesel-surcharges-under-adjusted-formula