By Lisa Baertlein
LOS ANGELES, Aug 28 (Reuters) – U.S. retailers, manufacturers and small businesses are paying hefty fuel surcharges to ship their goods, not only as the U.S.-Israeli war on Iran boosts fuel costs but also as some shippers profit from the fees.
The charges have become a growing source of tension across supply chains, with customers arguing that some companies are using them to boost profits rather than simply recover higher fuel costs. Ultimately, those extra costs can be passed on to inflation-weary consumers.
The surcharges have generated tens of millions of dollars in profit for railroad operator Union Pacific and provided a modest earnings boost for UPS, the companies said.
In the clearest publicly available example, Union Pacific collected $91.1 million more in fuel surcharge revenue than it paid for fuel during the second quarter, boosting profits by $83.2 million, or 14 cents per share.
Union Pacific’s result far outpaced rivals, spurring concerns that fuel recovery charges are generating profit.
“Ultimately, fuel surcharges are a component of the overall cost we negotiate with customers and something they take into consideration when choosing Union Pacific and the service we provide,” the company said in a statement.
U.S. railroads are the only transportation providers required to report fuel costs and surcharge revenue to federal regulators, offering a rare window into the impact of the charges since the Iran war began on February 28.
Fuel surcharges are designed to offset higher energy costs, but customers have long argued they can become disconnected from the actual cost of fuel and boost profits.
UPS and FedEx have steadily increased the size of their fuel surcharges in recent years.
“The original part of the cost consideration almost seems to be lost in translation,” said Mingshu Bates, chief analytics officer at invoice auditing firm AFS Logistics, referring to the growing surcharge rates.
When the average diesel price was $3.35 a gallon in August 2021, UPS added a fuel charge of about 9% to the base shipping rate for the everyday packages shipped to homes and businesses. That surcharge is 24.25% today for UPS and 23.75% for FedEx, according to an analysis by AFS Logistics.
UPS and FedEx, often described as a duopoly because of their dominance of the market, offer customers little room to push back because their fuel surcharges are broadly similar.
UPS Chief Financial Officer Brian Dykes said fuel surcharge collections had a “modest” net impact on consolidated operating profit in the latest quarter. Brie Carere, chief customer officer at FedEx, said they were “not a material driver of our adjusted operating income.”
Neither company explained why the surcharge percentages have risen so sharply.
For contrast, the heavily regulated United States Postal Service imposed its first surcharge on April 26: 8% on most packages.
MAERSK’S ‘COMPETITIVE ADVANTAGE’
The issue extends beyond U.S. railroads and parcel delivery firms. War-related disruption and higher fuel costs have rippled through global shipping networks, allowing some carriers to impose emergency surcharges and raise rates, fueling complaints that crisis-driven fees have become a profit source.
Fuel surcharges have also supported profits at container ship companies such as A.P. Moller-Maersk.
The Danish carrier reported second-quarter profit excluding items of $3 billion, almost $1 billion more than analysts expected and up from $2.3 billion the year earlier.
Maersk imposed emergency surcharges and made other adjustments to cover higher fuel costs for the roughly 70% of cargo it moves under longer-term contracts. A rate surge on the remaining spot market shipments drove profit in the quarter, executives said. The company did not directly address the impact of fuel surcharges on profits.
Chief Executive Vincent Clerc in an earnings call this month said digital investments helped the company raise rates more quickly than rivals, an ability he called a “competitive advantage.” Maersk declined to elaborate further.
An analysis by supply chain data provider VesselBot showed that when marine fuel costs jumped about 30% this year, container shipping fuel surcharges surged by as much as 75%, decoupling dramatically after closely tracking fuel prices in 2025.
“After March, these charges exploded,” said VesselBot CEO Constantine Komodromos.
Analysts said freight rates and surcharges in container shipping currently are driven as much by supply and demand as by underlying costs, giving carriers scope to recover more than just higher fuel bills when market conditions are favorable.
Ship operators’ bargaining power is at its strongest since the COVID-era shipping boom, according to Xeneta chief analyst Peter Sand.
Industry earnings reports have reinforced container cargo customers’ long-standing concerns that transport providers can use periods of disruption to push through additional charges. James Hookham, director of the Global Shippers Forum, said Maersk’s latest profit figures would do little to ease those fears.
“The Maersk results further enforce the ‘crisis-means-cash’ syndrome,” Hookham said.
(Reporting by Lisa Baertlein; editing by Timothy Gardner and Sanjeev Miglani)
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