"Amazon Imposes Fuel Surcharges on Parcel Deliveries... Will Grocery Prices Rise?"

Amazon to Impose 3.5% Fuel Surcharge Starting April 17
USPS and FedEx Among Others Also Raising Fees

After U.S. President Donald Trump announced a large-scale offensive for the next two to three weeks in a national address on April 1 (local time), the U.S. logistics industry responded to fears of rising oil prices by introducing new fuel surcharges. As logistics costs are passed on to consumer prices, there are concerns that this could drive up grocery prices.

On April 2, Amazon, the world’s largest e-commerce company, announced that it would impose a 3.5% fuel surcharge on sellers using its platform. Starting April 17, Amazon will charge a 3.5% fuel and logistics surcharge to sellers who use its own delivery service, Fulfillment by Amazon (FBA). This fee will apply to sellers in the United States and Canada who use Amazon's logistics services from April 17. Beginning May 2, the surcharge will also apply to sellers using logistics services such as Buy with Prime and Multi-Channel Fulfillment (MCF), which handle orders from platforms outside of Amazon.

Amazon logo. Photo by Reuters and Yonhap News

According to Bloomberg and other sources, Amazon stated that sellers using FBA will be charged an average additional fee of 17 cents per item, with the amount varying depending on product size.

As high oil prices had a direct impact, the company began passing on the costs in earnest. Amazon explained, "Operating costs across the industry have increased due to rising fuel and logistics expenses," adding, "Until now, we have absorbed these cost increases internally, but, like other major carriers, if these costs remain high, we will impose a temporary surcharge to partially offset them." Amazon also imposed a 5% fuel surcharge in April 2022.

Amazon is not the only company raising delivery charges due to higher oil prices. The United States Postal Service (USPS) will, for the first time, add an 8% surcharge to parcel shipping fees. The current medium flat-rate express mail price of $22.95 will rise to $24.80 starting April 26. This pricing system will be in effect until January next year. Private carriers FedEx and UPS also significantly increased their fuel surcharges last month. According to ShipMatrix, a parcel data consultancy, the average share of fuel surcharges in total shipping costs, which stood at 6.3% in 2020, surged to 26% as of early last month.

Rising logistics costs have also been noted in food distribution, where fast delivery is crucial. According to The New York Times (NYT), U.S. food distributor UNFI imposed an extra $65 charge per delivery after the national average diesel price reached $5.38 per gallon in the fourth week of March. Major U.S. food distribution companies including Sysco, US Foods, and Performance Food Group have also started to impose fuel surcharges.

According to Macromicro, as of April 3, the national average diesel price in the United States, based on American Automobile Association (AAA) data, was $5.51 per gallon. Diesel, which is used as truck fuel, had hovered around $3 per gallon before the war between the United States, Israel, and Iran, but has surged sharply in recent days.

Bloomberg reported that by imposing the fuel surcharge, Amazon is passing the burden of rising oil prices onto its sales partners instead of consumers. However, The Wall Street Journal (WSJ) analyzed that whether the higher costs from the fuel surcharge are passed on to consumers depends on each seller, but warned that it could ultimately lead to higher consumer prices.

In his national address the previous day, U.S. President Donald Trump signaled a massive strike against Iran and emphasized American energy independence. He asserted that the U.S. does not import crude oil via the Strait of Hormuz and is safe from oil supply shocks. However, growing cost pressures from oil prices are evident across the entire supply chain.

Airlines are also raising checked baggage fees in addition to fuel surcharges. On April 3, United Airlines announced it would raise checked baggage fees by $10 for U.S., Mexico, Canada, and Central and South America routes on tickets purchased from April 3. JetBlue Airways will increase checked baggage fees by $4 to $9.

This content was produced with the assistance of AI translation services.