Good Question: Why Do We Still Have Fuel Surcharges?
MINNEAPOLIS (WCCO) -- Twice a month, CitySprint, a courier company based in Edina, adjusts its fuel surcharge. It generally adjusts down one percent for every 10 cent drop in gas.
"I wouldn't call it a revenue center or profit center. It's more or less the cost of doing business," said CitySprint General Manager Bret Hueper.
Larger delivery companies, like UPS, have also reduced their fuel surcharge. According to its web site, UPS uses an index-based surcharge that is adjusted monthly and based on the information reported by the U.S. Energy Administration.
"Give it time. Prices will come down if oil stays low," said Paul Vaaler, a professor at the Carlson School of Management. He thinks the cost of food, clothes, even airline tickets will drop as long as they in competitive industries.
Vaaler says people have to wait for the effect of lower gas prices to reverberate through the market. He says goods are services that are sold right now were produced three to six months ago.
"We have to wait for the inventories of those higher priced goods to go out the door and when the new things come in, prices go down," he said.
As for airline fuel surcharges, Vaaler says it's important to remember some airlines hedge their fuel costs three to six months out. He also says some airline will wait for more certainty to drop the fuel charge unless pushed by competition.
"Even though forecasts are for lower prices through at least 2015, some of those companies want to make sure it will really stay low," Vaaler said.