Oil Scrooge boosts costs for shipping
Tom Incantalupo / Newsday
MELVILLE, N.Y. -- The same oil price increases that have sent gasoline over $3 a gallon again and heating oil to record highs will make it more expensive this year to mail those dried fruitcakes, loud ties and other holiday gifts.
The 40 percent increase in crude oil prices since August has led to higher fuel surcharges by the major package delivery companies, who said the costs of jet fuel for their planes and diesel fuel for trucks have soared.
The U.S. Postal Service is an exception. While higher energy prices have pushed expenses higher, the rules governing its rate structure don't provide for a fuel surcharge, even though its 216,000 vehicles constitute the world's largest civilian fleet.
Among the increased charges this holiday season:
• FedEx Corp. will increase its surcharge for air-shipped packages from 16.5 percent to 17.5 percent starting Monday. For ground-shipped packages, the surcharge will rise from 5 percent to 5.25 percent. The new figures compare to 11.5 percent and 3.5 percent, respectively, a year earlier.
• United Parcel Service will hike its ground shipping surcharge from 5 percent to 5.25 percent on Monday, while air and international surcharges go up from 16.5 percent to 17.5 percent, according to its Web site. A year earlier, the ground surcharge was 3.5 percent and the air charge was 11.5 percent. UPS says its fuel cost in the first nine months of 2007 was $2.05 billion, compared with $1.97 billion in the same period a year earlier.
• DHL will hike its surcharge Sunday to 19.5 percent for air and international shipments and 5.3 percent for ground shipping, from 18.5 percent and 5 percent, respectively.
"Fuel surcharges have been part of most transportation companies' pricing for four or five years now," said company spokeswoman Sally Davenport at FedEx headquarters in Memphis.
On Friday FedEx Corp. announced it will increase its rates again with the new year -- 2008 rates for FedEx Ground and Home Delivery will go up an average of 4.9 percent. The change matches the 2008 rate boosts planned by United Parcel Service Inc. and DHL Express, a unit of Germany's Deutsche Post AG. The FedEx rates take effect Jan. 7.
The ground rate increases at FedEx and UPS match those for 2007, which were the biggest since 1998.
Andy Lipow, president of the Houston-based energy consulting company Lipow Oil Associates Llc, said high demand for jet fuel at this time of year because of holiday travel is compounded by the blending of kerosene -- which is virtually identical to jet fuel -- with heating oil and diesel fuel during winter to increase their supply and help keep them from gelling in the cold.
Further, diesel, which is virtually identical to home heating oil, tends get more expensive when cold weather arrives.
Other factors contribute
But more than just the rising price of crude and seasonal factors are at work this year to make consumers' holidays a little less merry, Lipow says.
New federal clean air rules require all diesel used in transportation to be "ultra low" in sulphur and, for agricultural machinery, to be "low" sulphur. Both types are more complex to refine. "That gives us a greater risk of supply disruptions," Lipow said. That risk tends to increase prices.
Further, says Lipow, the new requirements have created uncertainty in the market about supplies of low, ultra low and higher sulphur grades of what are called collectively "distillates" -- uncertainty that has caused traders to bid up prices even further of diesel and heating oil.
Added to that is rising demand worldwide for diesel for motor transport and agriculture. And, finally, the icing on that fruitcake: Lipow says a cold winter earlier this year in South America increased demand for diesel fuel to generate electricity
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