High oil prices not a reason to boost profits

No, this column is not directed at oil producers. They are not the guilty party in this tale of cost escalation.

Nor is this column about the many businesses around the world stressed by energy prices that have shot up faster and higher than fireworks on the Fourth of July.

As crude oil has jumped, surged and spiked from just over $65 a barrel on Dec. 1 to painfully over $100 a barrel this month, consumers have been paying more at the pump — whether the corner gas station for a dozen or more gallons to fill up a car or pickup, a couple hundred gallons of diesel at the freight depot to fill up the tanks on an 18-wheeler, or tens of thousands of gallons at a marine terminal to load up a tug with fuel for the barge run to Southeast Alaska.

Freight companies, delivery services and others dependent on fuel to run their operation — and beholden to energy prices as one of their biggest expenses — have long relied on temporary surcharges to cover unpredictable and unbudgeted sharp increases in gasoline, diesel and other fuels they use.

The public understands that the freight haulers have two options: Either absorb the higher cost out of their business pocket, or pass it on to consumers. No customer loves seeing the fuel surcharge tacked on at the bottom of an invoice, but it’s no surprise with $100 oil in the headlines. Few businesses can absorb that big of a price shock and still pay all their other bills.

What is upsetting, and actually surprising in its honesty, is when a company admits it is boosting its fuel surcharge faster than its actual cost of fuel. Great for their bottom line, but dishonest in calling it a fuel surcharge. A more appropriate name would be profit surcharge.

FedEx Corp., in its quarterly financial report last week, said total revenues rose 10% and profits went up 25% in the third quarter of its fiscal year, covering December, January and February. That was when crude oil prices were rising faster than at any time since then-Alaska Gov. Sarah Palin ran for vice president of the United States — when national politics seemed as volatile as oil prices.

The freight and delivery company’s income did not increase because it moved more packages in its FedEx planes and trucks. It made more money in part because it padded its fuel surcharge to boost profits. And it admitted it.

The Wall Street Journal reported last week: “FedEx said all its divisions were helped by the company raising of fuel surcharges on shipments at a faster pace than fuel costs rose.”

The largest FedEx Express sorting hub in the world is in Memphis, Tennessee, where the newspaper, the Memphis Commercial Appeal, also reported last week that the company enjoyed higher profits because “fuel surcharges … outpaced the cost of fuel.”

Everyone is seeing the high cost of fuel, and the escalating cost of most goods and services, show up when they shop at the grocery store or gas station. Whether people like it is not the point, but customers deserve honesty. For FedEx to take advantage of the situation by inflating its fuel surcharge to boost profits — that’s a package that should be marked “return to sender.”