There was no press release, there was no notice to shippers that I am aware of. FedEx did as I predicted and changed the tables by which they calculate their fuel surcharge and it will be effective February 2. Unless you have in your contract that the rules that apply at the time of signing will remain in effect during the life of the contract, then most likely you are going to experience an increased cost in your shipping in 2015 on top of the General rate increase, the accessorial increases and the changes to the dimensional rule for ground shipments.

Let’s just take an example. The FedEx ground fuel surcharge is calculated in the price of diesel that’s published by the US government. So for example if you go to the FedEx website to the fuel surcharge page and look at ground there is a range by which the percentage applied will be based. Currently if a gallon of diesel published comes in between $2.47 and $2.59 then the fuel surcharge on ground transactions will be 1%. Keep in mind the surcharge applies not only to the freight but also to the transportation “related” accessorial charges, like the residential fee and the delivery area surcharge.

The new table has a slightly wider range and says that if fuel is between $2.47 and $2.65 and therefore the fuel surcharge will be 3.5%. 

Yep you pay 2.5% more. Hard to believe that this bold move can be justified in a world of falling fuel prices. They don’t hesitate to take the elevator up when the prices are rising, yet they taketh away when fuel is falling.

If we look at a range say $2.71 to $2.83 the current table it would set the fuel surcharge at 2%. The new table range goes from $2.65 to $2.83 sets the fuel surcharge at 4%. A 2% jump.

The FedEx ground fuel surcharge beginning January 5 will be 5.5%. This is based in diesel being at least $3.55 but less than $3.65. If you look at the new table (at least $3.55 but less than $$3.73) then the new and improved fuel surcharge would be 6.5%. 

Let’s do the same exercise with the air surcharge.

On Jan 4 the air (Express) fuel surcharge will be 4.5% (this is the first time in my memory that the air surcharge will be less than the ground surcharge – but if you recall the integrators used to bake 2% of the fuel table into the base rates for many years and now it pays the shippers back – for a month).
This percentage is based on jet fuel costs published by the Dept. Of Energy. On the current chart 4.5% equates to fuel being at least $2.26 bit less than $2.32. Looking at the new table ($2.23 to $2.31) results in a fuel surcharge of 6.5% or a 2% increase.

As many of my followers know, the fuel surcharge for UPS has been higher than that charged by FedEx for some time now. The UPS ground surcharge is currently (as of Dec 29) is 6.5% and the air is 7%.

FedEx is doing this because they can. There is little shippers can do about it because most FedEx contracts read “the service guide as published on the website at the time of tender, and which the carrier can change at any time without notice”. 

FedEx still maintains a slight selling advantage over UPS so that will prevent some mass exodus by outraged shippers, unless of course you get UPS to agree to match or beat (say by using the current FedEx tables in your contract) and they give you a better value proposition of discounts and other concessions. I think this is just the carrier’s way of wishing their shareholders a Happy New Year.

You can also read more on this by referring to our eblast from January 2nd.