The ongoing 2025 cycle of fuel‑surcharge increases by UPS and FedEx is reshaping the cost dynamics for retailers and shippers, with broad implications for supply‑chain strategies. As detailed by recent reporting, both carriers have elevated their index‑based fuel surcharges for ground, air, and international services — prompting retailers to rethink shipping costs, margins and fulfillment models.
What’s Changing — and Why
UPS raised its fuel surcharge rates in June 2025, pushing ground and air surcharges to roughly 18.75 % of base rates.
Similarly, FedEx followed with broad-based increases across Ground, Home Delivery, Express Freight and international shipping, adjusting surcharge tables as of December 1, 2025.
These surcharges are not arbitrary — both carriers tie their rates to publicly available fuel indexes (e.g., the national average price for on‑highway diesel for ground service, or the U.S. Gulf Coast jet‑fuel price for air shipments) and adjust surcharge levels weekly.
However, critics argue that the increases in surcharge percentages outpace actual fuel price movements, suggesting that carriers are using the surcharge index as a lever to bolster per‑package revenue.
Real-World Impact on Retailers and Shippers
The cumulative effect of surcharge hikes and additional fees is raising the average per-package cost — 2025 ground delivery costs are already running at their highest levels in years, with the TD Cowen/AFS Freight Index showing ground parcels ~31.2 % above its January 2018 baseline in Q3 alone.
For retailers operating on thin margins or offering low-cost/free shipping to stay competitive, the added surcharge burden can erode profitability. Some shippers are already responding by consolidating shipments, optimizing package dimensions, or shifting volume to lower-cost carriers or shipping methods.
Strategic Takeaways for Omnichannel Retail & Supply Chain
Given the volatility, businesses should:
- Track carrier surcharge updates weekly, especially ahead of seasonal peaks.
- Revisit fulfillment strategies, including using regional carriers, multi-carrier mixes, or hybrid door-to-door plus store pickup models.
- Optimize packaging and shipping frequency to reduce the number of parcels — less frequent, consolidated shipments can mitigate surcharge impact.
- Consider renegotiating carrier contracts to include surcharge caps or fuel‑price index protections, especially if shipping volume is high.
As carriers press forward with fuel‑surcharge increases, retailers and supply‑chain operators must adapt rapidly. For many, these adjustments may mean revisiting fulfillment models, reworking logistics strategies, or reconsidering how shipping costs are passed to consumers.
