International express shipping costs are on the rise again as carriers quickly pass soaring jet fuel prices on to their customers.
The core of the issue is a dramatic spike in energy prices. Sparked by the ongoing crisis in the Strait of Hormuz, the global average price for jet fuel has more than doubled, jumping from around $99 per barrel at the end of February to nearly $209 in early April. This isn't a typical seasonal fluctuation; it's a significant shock to the global energy market, directly impacting the operational costs of air freight.
This price shock translates directly into higher shipping fees through a clear causal chain. First, geopolitical events, particularly the U.S. announcement of a blockade on Iranian ports on April 12, caused crude oil prices to surge by as much as 8% in a single day. Second, since jet fuel is refined from crude oil, its price followed suit, reaching new highs. Third, major carriers like UPS and DHL use a fuel surcharge system that is automatically indexed to benchmark fuel prices. This mechanism ensures that any increase in their fuel costs is passed on to shippers almost immediately.
The extreme volatility has also forced a change in how carriers manage these surcharges. Previously, many updated their surcharges on a monthly basis. However, with prices swinging wildly on a daily basis, this became untenable. DHL, for instance, has now switched to weekly updates to avoid absorbing losses from sudden price hikes. This shift to a more frequent update cycle means shippers now face more unpredictable and rapidly changing costs.
This trend extends beyond just the major express carriers. Amazon's decision to implement its own fuel and logistics surcharge signals a broader industry-wide movement. The underlying market was already vulnerable due to tight supply controls by OPEC+ and previous refinery disruptions. The current geopolitical crisis has simply ignited these pre-existing conditions, leading to the widespread cost pass-throughs we see today. For anyone shipping goods internationally, the message is clear: expect higher and more volatile costs for the foreseeable future.
- Fuel Surcharge: An additional fee charged by carriers to cover the fluctuating cost of fuel. It is typically calculated as a percentage of the base shipping rate and is adjusted periodically.
- Brent Crude: A major benchmark price for crude oil purchases worldwide, sourced from the North Sea. It is used to price over two-thirds of the world's internationally traded crude oil supplies.
- Geopolitical Risk: The risk that political actions, conflicts, or instability in a country or region will have a negative impact on markets and investments.