Businesses still hit with fuel surgharges despite cheaper gas

“ Back in 2006 these didn’t exist”

Gas prices have dropped more than $2 since July, but some businesses in town are still paying hefty fuel surcharges to have goods delivered from regional and statewide distributors. The fuel surcharges have frustrated some business owners, who must either compensate for the extra fees out of their own pocket or pass the price of gas onto individual consumers.

Gas Café owner Andrew Gitin
says the fuel surcharges he pays to
have many retail goods delivered
makes a considerable impact on
their profitability, especially when
consumers are familiar with a
product’s usual price and would
quickly notice an increase.
Therefore Gitin takes the expense
out of his own pockets.
For example, Gitin says Kent
News Company distributes his
assortment of magazines and periodicals
and charges a $4 fuel
surcharge to deliver them to the
Gas Café, in addition to a variable
service charge. For Gitin, the trouble
is the magazines come with
a suggested retail price on the
front cover. Despite being Crested
Butte’s only retailer of some of
the more eccentric magazines out
there, Gitin says he still wouldn’t
consider raising their prices.
Mountain Spirits Liquors
owner Aaron Tomcak says the fuel
surcharges charged by beer and
liquor distributors are a hassle.
“You just end up passing that on
to the consumer, which is tough
for us to do,” he says. “We deal
with 10 different distributors, and
pretty much all of them charge for
fuel.”
Gitin says all but one of his
beer distributors include fuel surcharges
from $5 to $10 on each
bill. Gitin says as a gas station
convenience store he can only sell
reduced-alcohol-content beer, and
he doesn’t sell much of it to begin
with. Gitin says sales managers at
the beer distributors “suggested I
just order more. So I only get one
order a month rather than two…
where am I supposed to put it?”
Tomcak says the profitability
of his products isn’t as affected
by fuel surcharges because he can
order in bulk. He says restaurants
and smaller retailers have a harder
time with fuel surcharges on beer
and liquor because they order in
limited quantity.
Crested Butte Mountain
Resort culinary director Dean
Sprague says large quantities also
help the resort overcome fuel surcharges
on each delivery. Sprague
says CBMR uses Sysco Foods for
delivery of most grocery products,
and they charge a $9 fuel surcharge
on each order.
He says CBMR isn’t as affected
by fuel surcharges because the
resort’s grocery orders can provide
thousands of meals at each delivery,
and because all food is delivered
to a central resort-operated
distributing center. “For us to pay
$10 for a truckload of food is fine.
I don’t hold that against them,”
Sprague says. “We do combat
that with centralized delivery…
We beat the system a little bit that
way.”
But what’s irritating to some
businesses rather than the surcharge
itself is the fact that gas
prices have gone down considerably
nationwide, while fuel surcharges
have barely dropped at
all—if any.
According to the U.S. Energy
Information Administration, diesel
fuel prices have dropped to approximately
$2.65 this week, after
reaching an all-time high of $4.75
back in July.
Most of the Gas Cafés deli
and grocery supplies are shipped
through Cormark Foods. Gitin
says Cormark used to charge $19
per delivery for fuel, but recently
dropped the surcharge to $15. After
talking with company representatives,
Gitin says he learned
Cormark adjusts its fuel surcharge
quarterly. Gitin says that’s frustrating
because the drop in Cormark’s
fuel surcharge this quarter did not
come close to reflecting the actual
drop in diesel and gas prices. Maxwell’s Steakhouse owner
Peter Maxwell says he spoke
with some of his distributors over
the fuel surcharges that haven’t
changed. “I had a conversation
with some of [the distributors]this week. I said, ‘Listen, gas was
four bucks a gallon, now it’s back
down, you should get rid of the
surcharge.’ They said they’re looking
into it. I think they know their
goose is cooked.”
Sprague says he’s not surprised
the surcharges haven’t
dropped along with the price of
gas. “It seems like once they increase
it to a certain level, it’s
just going to stay at that level,”
Sprague says.
Tomcak agrees. “They’re certainly
not going to stop charging
that. It’s kind of a hassle. Five
years ago there was no such thing
as a fuel surcharge,” Tomcak says.
Maxwell says there are both
positive and negative aspects to
fuel surcharges. He says when gas
prices are up and it costs more for
distributors to do business, the
surcharges make sense. “When
oil is $147 a barrel, you can’t get
around it,” Maxwell says.
But by keeping the charges
high when gas prices go back
down, he says the distributors do
a poor service to their consumers.
“I don’t raise and lower our prices
based on fuel surcharges. We try to
give a fair product for a fair price
regardless of whether the charges
go up or not… At the same time,
we’re also the customer, and you’d
like to think our purveyors would
take care of their customers.”
Maxwell says, “If they were
smart about it, they’d bury the
fuel surcharge in the price of the
product.”
Gitin thinks that’s a better
way for distributors to pay for fuel.
“Coca Cola told me they chose not
to put on a fuel surcharge and increased
the price of Coke products.
I think that’s a fair way to make up
for fuel costs,” Gitin says.
Gitin also questions the legality
of fuel surcharges, which are
tacked onto regular invoices without
warning.
On Friday, November 21,
Gitin sent a letter to the state’s
attorney general questioning the
high fuel surcharges when gas
prices have come back down. He
has also called “Troubleshooter”
Tom Martino from Fox News, and
the Better Business Bureau.
The American Independent
Truckers Association (AITA) says
there’s no government oversight
of fuel surcharges, and encourages
truckers to implement fuel
surcharges if they haven’t already
done so.
According to the AITA website,
“A fuel surcharge is a fee
that can be added to the freight
charges, and they don’t require
governmental approval and you
do not need to file an application
with DOT to implement a fuel surcharge.”
Commercial litigation attorney
Jerome Noll of the nationwide
law firm Meiselman, Denlea,
Packman, Carton & Eberz P.C.,
argues that fuel surcharges are
a gimmick that consumers and
businesses should beware of. In
a June 21, 2007 website blog Noll
writes, “the fuel surcharge, we’re
told, is needed to pay for the marginal
increase in costs due only
to the higher cost of gasoline or
diesel. Apparently, if you weren’t
shipping the package, or ordering
a service, the company wouldn’t
need to buy the gas. The reality
of course is much different: most
companies would still have to fill
up their delivery trucks to service
other customers… Companies impose
surcharges, instead of raising
prices, because they are hoping consumers won't notice.