FedEx's 30.5% fuel surcharge comes with a holiday surprise

Sending Christmas parcels might reveal a different picture, even though Americans are now seeing some respite at the gas pump.

The national average price of regular gas fell to approximately $3.94 per gallon on Nov. 11, according to AAA.

For homes preparing to travel for Thanksgiving or make last-minute shopping trips before Black Friday, this is good news.

However, cheaper shipping may not always follow from declining gas costs. For the week of Nov. 9 through Nov. 15, FedEx (FDX) has increased its fuel cost for Ground and Home Delivery packages to 30.5%. This is an increase from 29.25% last week.

FedEx’s official surcharge schedule confirms the increase. The 30.5% does not represent a 30.5% increase in the overall delivery cost. It is a surcharge that is applied to some supplementary fees and qualified transportation expenses.

However, time is crucial. Small companies are getting ready for one of their busiest shipping seasons of the year, and Americans are getting ready to send presents.

Customers are worried about whether they will be charged more for delivery when they check out.

The dilemma for FedEx investors is whether fees can preserve profitability without luring clients to less expensive rivals.

FedEx’s shipping fees reveal why cheaper gas isn’t enough

The gas that Americans put in their automobiles is very different from the fuel that delivery companies need to run their businesses.

AAA reported an average gasoline price of $3.94 on Nov. 11. In contrast, the average price per gallon of diesel was almost $6.13. This helps explain why, despite drivers seeing relief at the pump, FedEx’s fuel cost is so high.

There is a lag between the underlying fuel-price measurement and the relevant weekly rate, and the company’s Ground and Home Delivery premium is linked to national diesel prices provided by the Energy Information Administration.

Think of a package that qualifies for a $10 shipping fee. The gasoline fee alone would add $3.05 at the current rate of 30.5%. The 29.25% rate would have added approximately $2.93 a week ago, so the most recent increase in this case adds about 13 cents.

The current fuel price, before any relevant costs, would be $305 for a small company delivering 100 shipments with the same $10 qualifying charge.

Service, transportation conditions, and client agreements all affect actual costs.

Related: Goldman Sachs issues grim job warning as FedEx axes 856 in Texas

Customers are less directly impacted financially.

Delivery costs may be covered by retailers, charged individually to consumers, or included in product pricing. In addition, there is no guarantee that every online purchase will cost more due to a FedEx premium.

FedEx’s holiday fees could create another cost surprise

Factors other than fuel might push transportation costs higher.

FedEx’s published holiday demand-surcharge schedule shows additional fees on certain residential deliveries and other qualifying packages.

Starting on Nov. 23, the demand premium for eligible FedEx Ground Residential and Home Delivery residential shipments will rise from 50 to 80 cents per package. The higher charge remains scheduled through Dec. 27.

Some shipments are subject to significantly higher oversize or extra handling costs.

This difference is important for both small enterprises selling bigger items and households shipping large presents.

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For households, the useful comparison is the final shipping price, including any fuel, residential, or seasonal fees. Costs may be decreased by combining items, evaluating delivery alternatives, and verifying free-shipping levels.

Before establishing holiday shipping promos, small company owners should also examine their real carrier bills.

FedEx and UPS investors face a different calculation

As FedEx and United Parcel Service (UPS) strive to increase revenue, shipping fees are climbing.

FedEx reported revenue of $22.9 billion for the three months ended Sept. 30, compared with $20.4 billion a year earlier. Adjusted operating income increased from $1.03 billion to more than $1.2 billion.

FedEx’s Oct. 28 earnings release attributed the improvement partly to stronger package yields, higher volumes, and cost reductions. Additionally, starting on Jan. 4, 2027, it proposes to raise average package delivery prices by 5.9%.

The largest domestic competitor is likewise making pricing adjustments. UPS’s official fuel-surcharge schedule shows that its Ground charges are tied to diesel prices and updated weekly.

Its Oct. 27 earnings release showed $22.9 billion in sales for the third quarter, a 6.7% increase over the same period last year. Due to a 6.1% increase in income per package, its domestic revenue in the United States climbed by 4.5%. UPS also showed improved domestic operating profitability.

Surcharges are not pure profit, but they may help investors cover increased transportation costs. Fuel prices, client demand, and competition still determine delivery firms’ final earnings.

In addition, some consumers facing higher shipping costs may decide to switch providers or send fewer products.

The lesson is more urgent for Americans getting ready for the holidays: The cost of transporting the goods in your shopping basket may not go down just because gas prices are down.

Related: Americans making over $100,000 are shopping somewhere unexpected