An earlier version of this article on fuel surcharges gave an incorrect title for Jack Gillis at the Consumer Federation of America. He is the director of public affairs.
Consumer Pain Goes Beyond The Pump
Tuesday, June 24, 2008
Two dollars for pizza delivery.
An extra $1.70 to ship a $20 package.
And a $10 surcharge for lawn-mowing service.
The rising cost of fuel is rippling far beyond what consumers pay at the pump. Companies across an array of industries are instituting fuel surcharges that are nibbling away at consumers' pocketbooks. Like the airline industry with its baggage fees, businesses say they are being squeezed by higher gas prices and must pass on the costs to survive.
"We're going to be paying higher costs across the board whether you pay it in the form of a surcharge or you pay it in the form of higher prices," said Noreen Perrotta, finance editor at Consumer Reports, who recently paid an extra $10 to have her lawn mowed. "We'd better get used to it, and we better start budgeting for it."
Soaring gas prices are pushing Americans to shop for bargains, change their driving patterns and vacation at home. But less attention has been paid to the impact of the many small and often indirect ways that consumers are paying for gas, and generally, there are no regulations governing how fuel surcharges are calculated or implemented.
"It's almost impossible to tell if they're fair," said Jack Gillis, executive director of the Consumer Federation of America, an advocacy group. "It makes it very difficult for consumers to comparison-shop and understand the full price of the products that they're buying."
An investigation by the Florida attorney general's office this year resulted in cruise operators Carnival and Royal Caribbean agreeing to refund a total of $61 million to customers who were billed for fuel surcharges after booking their trips. After several calls to his office, Pennsylvania Attorney General Tom Corbett issued an advisory last month urging consumers to be on the lookout for undisclosed fuel surcharges. Consumer protection agencies in Maryland and Virginia said they had not received similar calls.
"The total price of a product or service is a key factor in any purchase and is something that needs to be disclosed to consumers upfront," Corbett said. "Any business intending to collect an added fee for fuel or energy must disclose those charges when they advertise their prices."
Grocery delivery service Peapod normally charges $6.95 to $9.95 for delivery, depending on the size of the order. About seven months ago, it added a fuel surcharge tied to the average price of gas in certain states. An online chart outlines costs up to $1.48 for a fuel price of $4.05 per gallon. But with gas averaging $4.079 yesterday, the current surcharge of $1.58 is literally off the charts.
"We did everything we could to save the customers," spokeswoman Elana Margolis said. "There was no way around. We waited for a really long time."
UPS and FedEx calculate their fuel surcharges for ground shipping monthly based on the Energy Department's average highway diesel price. Both are adding 8.5 percent of the cost of shipping the package to the final price through July 6, when the fee increases to 9.5 percent. And the U.S. Postal Service raised the price of letter stamps by a penny to, 42 cents, last month, along with other rates, as rising fuel costs contribute to the agency's money drain.