Watch Now

UPS shippers better fuel up for higher surcharges in 2022

Source: Domestic air and ground fuel surcharge levels to rise by 1% on Nov. 15

UPS' U.S. fuel surcharges increasing by 1%(Photo: Shutterstock)

If UPS customers haven’t baked higher fuel surcharges into their 2022 shipping budgets, they better find the kitchen fast.

Effective Nov. 15, the Atlanta-based transport and logistics giant will raise its fuel surcharges by 1% on all its U.S. air and ground services, according to a source familiar with the matter. The upcoming levy comes on the heels of a 75 basis-point fuel surcharge increase that UPS (NYSE:UPS) imposed over the summer.

UPS, which hasn’t made a public announcement, declined comment.

UPS sets its fuel surcharges weekly from a range of price points based on the diesel and jet fuel prices set by the U.S. Energy Information Administration (EIA). For example, should the weekly national average price for on-highway diesel range between $3.62 a gallon and $3.73 a gallon, the revised surcharge for that week would be 11%, up from the current 10% levy. The government’s most recent national average for on-highway diesel was $3.71 a gallon. 

There is a two-week lag between EIA’s pricing changes and when they are reflected in UPS’ surcharges. As a result, UPS’ surcharges for the week ending Nov. 1 would be based on the EIA prices for the week ending Oct. 18.

UPS said its ground delivery fuel surcharge will not apply to packages that originate in the lower 48 states and that are subject to what the company calls “retail rates,” which would typically be higher than what regular UPS shippers would pay.

The updated fuel surcharges, which were included in UPS’ 2022 pricing tables published on Thursday, will be added to the company’s base rate as well as to any of 12 separate delivery surcharges applicable to a particular shipment, the source said. Almost all of UPS’ surcharge levels will increase in 2022, which means regular UPS shippers could see their total costs rise by double-digit levels when the combination of rate and surcharge increases are factored in.

UPS disclosed earlier this week that it would impose a general rate increase of 5.9% for 2022. The increase, which applies to non-contract customers, takes effect on Dec. 26. This gives UPS the run of the holiday in capturing what is expected to be a blizzard of returns of gifts ordered online. The volume of online returns is markedly higher than the returns of items purchased in a store. The difference is the convenience of having returns picked up at a residence or at carrier-designated local “access points” versus driving to a store to process the return.

The holiday returns cycle typically ends within the first 10 days of the new year. However, with the COVID-19 pandemic triggering an unprecedented spike in e-commerce orders, all bets are off as to when the 2021-2022 returns season will end.

Mark Solomon

Formerly the Executive Editor at DC Velocity, Mark Solomon joined FreightWaves as Managing Editor of Freight Markets. Solomon began his journalistic career in 1982 at Traffic World magazine, ran his own public relations firm (Media Based Solutions) from 1994 to 2008, and has been at DC Velocity since then. Over the course of his career, Solomon has covered nearly the whole gamut of the transportation and logistics industry, including trucking, railroads, maritime, 3PLs, and regulatory issues. Solomon witnessed and narrated the rise of Amazon and XPO Logistics and the shift of the U.S. Postal Service from a mail-focused service to parcel, as well as the exponential, e-commerce-driven growth of warehouse square footage and omnichannel fulfillment.