Are Fuel Related Charges Here to Stay?
Tip It!The other day while driving home from work, I was struck by how far the price of gas has fallen. Around here, it’s down into the mid-$2 range, well below the $4+ prices that we were dealing with just a month ago.
This sudden drop in fuel prices got me to wondering about what will happen to all of those pesky additional fees popped up when fuel prices skyrocketed. You know, things like additional delivery fees, fuel surcharges, excess baggage fees for air travel, etc. These things were all introduced in the name of high fuel prices, but I haven’t seen anyone rushing to do away with them as fuel prices have slipped.
Call me a cynic, but I suspect fees of this sort are a one-way street. They get added when times are tough, and they never go away. Of course, it’s possible that fuel prices just haven’t fallen far enough for long enough… I hope I’m wrong.
What do you think? Are these nickel and dime surcharges here to stay? Or will they disappear if/when fuel prices drop further?
Published on October 27th, 2008 - 20 Comments
Filed under: Economy, Energy
About the author: Nickel is the founder and editor-in-chief of this site. He's a thirty-something family man who has been writing about personal finance since 2005, and guess what? He's on Twitter!
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October 27th, 2008 at 9:42 am
I remember the first time I encountered these about a year and half ago. I’d called a plumber to my house and the company charged me a $5 fee for him to drive the 2 blocks to my house. Next time I need them I’m going to negotiate this fee as silly as it sounds, but I am only 2 blocks away and that’s the whole reason I called them – they were in my hood!
But yes, these fees are here to stay and are lower gas prices (at least lower than $3.50/gal.)
October 27th, 2008 at 9:56 am
I know that Carnival Cruise lines is going to refund my colleague’s fuel surcharge for a cruise that was booked last January if the price of oil drops below $70/barrell for 20 consecutive days.
October 27th, 2008 at 10:04 am
I agree. Once rates are raised, companies will tend to keep it that way.
October 27th, 2008 at 10:36 am
Well, coming from a business perspective, fuel surcharges have always been around. UPS updates their fuel surcharges monthly and has for at least the past 6 years that I’ve been dealing with them, and those rates just happen to be about 300% higher now than they were then. Not that they are the only company, but it isn’t like fuel surcharges are necessarily a new concept. You probably just didn’t see it as blatantly obvious from the consumer end because it was always tucked away behind the scenes before in the normal prices you were paying.
October 27th, 2008 at 11:03 am
sorry, but if you think surcharges are going to go away, then you are living in la la land. time to vote with your wallet and only use services with the lowest surcharges.
October 27th, 2008 at 12:17 pm
They are probably here to stay unless prices stay lower for a long period of time. If that happens, there will probably be some market pressure to lower or eliminate fuel surcharges as an advertising ploy.
October 27th, 2008 at 1:33 pm
The fees are here to stay. However, don’t think for a minute that $2/gal gas is here to stay. Soon enough it will shoot right back up to where it was. The primary reason gas is so much cheaper now is that the dollar is so much stronger. Did you realize that a GBP is now only $1.54, down from around $2.10 a year ago? The dollar has gained dramatically against most currencies (except the Japanese Yen), mainly from implications of the current credit crisis. This is the primary reason that gas is cheaper. Oil is priced in dollars, and the dollar is so much stronger.
It is also true that demand for oil has declined. Last I read, oil consumption dropped about 10% from a year ago. But again, this is mainly due to a temporary change of events — the weakening global economy. Once the world recovers from its recession, the demand for oil for rise again. And the supply of oil certainly isn’t getting any larger.
All this is to say, don’t get used to $2 gas. It won’t last.
October 27th, 2008 at 2:55 pm
Thank you for providing me a reason to go through my bills and determine which companies I’ll be contacting to inform them their rates need to change. (It might also be worthy to note that the price of gasoline now is most likely LESS than it was when they raised the rates.)
October 27th, 2008 at 3:25 pm
One thing to keep in mind is that diesel fuel hasn’t dropped in price very much. Most items that are delivered come by a diesel powered truck.
October 27th, 2008 at 3:30 pm
Ron: Pizzas aren’t delivered by diesel truck…
October 27th, 2008 at 4:31 pm
I think the fees will stick until one of the airlines decides to launch a price war involving the fees. If they succeed in luring customers by dumping fees, then the fees will recede, until the next time oil prices spike.
I’ve heard experts say the same thing about food prices – the higher prices will stick until someone launches a price war.
October 27th, 2008 at 4:44 pm
Of course they’re here to stay! It’s the same logic behind fare hikes caused by the supposed debt the transportation companies have to suffer with, and somehow after they’ve raised prices they discover some huge savings they forgot about. Do they lower the fares? Of course not; they justify it by saying that one of these days they WILL be in debt, and they want to stow away money for the future. Then again, realistically speaking, I wonder how hard it is to lower prices they’ve already increased and make adjustments based on that.
October 27th, 2008 at 6:23 pm
I’m not sure about all those extra charges, could go either way. But I imagine as something in one market, like baggage surcharges goes, the rest of the industry will be sure to follow suit. What strikes me is that the price of fuel has fallen so far so fast. I remember when we would watch the price of crude go up one day, and the price would be reflected the next day at the pump. Surprisingly, this has been more or less the case lately too with the dropping prices.
October 28th, 2008 at 9:38 am
It’s kind of like government: once they get their hands into something, they don’t get out of it.
October 28th, 2008 at 10:20 am
@nickel #10: Yes, they are — the components that make the pizza are distributed from warehouses and delivered by diesel trucks. That cost is rolled into the overall cost of the pizza you buy.
@Rick #7: This is dead on. The dollar is suddenly a better investment for the FOREX traders because even though we are in a financial crisis we appear better able to weather the storm than say Europe and Japan. It turns out the single best thing we could do to drop gas prices wasn’t environmental at all, we just had to destroy the rest of the world’s markets with our securitized bad mortgages!
Remember too that the airlines (for one) and probably other major transports (trucking, buses, shipping, etc) can (and have a major financial incentive to) lock in their fuel rates under contract for to get favorable rates. Southwest Airlines did this and was paying a ridiculously low amount for fuel which was the reason they remained profitable the past few years. If I’m not mistaken their contract may have just run out, and suddenly they post a loss? Big shocka…
So if they locked in their fuel rates at $110 a barrel as a hedge against it hitting $200 a barrel, boy are they passing on the hurt to the consumers…
Just some guesses.
October 28th, 2008 at 10:22 am
Also — OPEC wants to cut production to drive oil prices back up. So the prices now are probably only temporary.
Plus we just finished the summer peak driving season…
October 28th, 2008 at 10:39 am
Dave: You know perfectly well what I’m referring to when I bring up pizzas. The delivery charge on a pizza applies to delivery from the pizza place to your house. That’s not done with diesel trucks, so the argument doesn’t hold. If they want to raise the price, fine. Raise it. But don’t tack it on as a BS fuel-related delivery charge.
October 28th, 2008 at 2:06 pm
My guess is they won’t go away anytime soon, those fees are a revenue source that might help prop up company’s bottom lines through the downturn. Plus consumers become used to the higher price, gas at $3/gal suddenly feels like a bargain even though it was just $2/gal a few years ago. Companies charge what the consumer will pay.
November 3rd, 2008 at 8:55 am
@nickel:
Heh. Actually, no I don’t. It’s not delivery, it’s Digiornos.
My lifestyle choices don’t include delivered pizza, so that’s one less thing I have to worry about.
November 3rd, 2008 at 8:58 am
Dave, we rarely order pizza out, so it’s not a big worry for me either. But… It’s a sign of how things are going. Oh well, once the dollar re-weakens, gas prices will go back up and will be well again.