The U.S. Postal Service (USPS) is planning to impose a temporary fuel surcharge on packages for the first time as the struggling government agency grapples with higher transportation costs stemming from rising oil prices.
On Wednesday, the USPS filed notice with the Postal Regulatory Commission (PRC) to increase prices 8 percent to ship parcels through its Priority Mail, Priority Mail Express, USPS Ground Advantage and Parcel Select services.
No other services, including letter mail and First-Class stamps, will be affected by the surcharges.
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If approved by the commission, the new prices would take effect on April 26, and would remain in place until Jan. 17, 2027. The USPS Board of Governors approved the proposal on Tuesday.
Currently, the price to ship a parcel in a small Priority Mail flat-rate box is $12.65. That price would rise to $13.65 if the surcharge gets approved.
This price adjustment comes amid a litany of issues at the Postal Service, with Postmaster General David Steiner telling a House subcommittee hearing this month that the national courier would be out of cash by as early as October if it continues operating at its current run rate without congressional assistance. If the USPS defaults on more payments, it would maintain cash flow until February 2027.
At the hearing, Steiner asked Congress to consider lifting some regulatory restrictions that would increase the agency’s debt limit, which would further enable the agency to raise prices. USPS can take on no more debt under federal law, which has capped the agency’s borrowing at $15 billion. That limit has not changed since 1992.
Compounding its ongoing cash flow concerns, the USPS is competing with public companies including UPS and FedEx that have been willing to pull surcharge levers of their own to account for shifts in oil prices and customer demand.
UPS’ domestic ground fuel surcharge has increased from 21.25 percent on Feb. 23 to 27 percent effective March 30. FedEx Ground’s surcharge currently sits at 25.5 percent, up from 21.75 percent as of Feb. 23.
Both logistics companies update their fuel surcharges weekly based on prices published by the U.S. Department of Energy.
“Given the already tenuous nature of the Postal Service’s current financial position, it is imperative for the Postal Service to act in response to these changed circumstances and to align with industry practice,” said the agency in its notice.
Oil prices have skyrocketed in the weeks after the U.S. and Israel began conducting military strikes against Iran. Crude oil futures sat at $94.61 as of noon Thursday, up more than 35 percent from pre-war prices in late February.
While the USPS refers to the fees as a “time-limited adjustment,” the agency alluded to potentially imposing other surcharges in the future.
“It will provide a necessary bridge to a permanent mechanism to reflect market conditions in prices for competitive products that can support the Postal Service’s ability to achieve the universal service obligation in a more financially sustainable manner going forward,” USPS said in a statement.
As the postal operator mulls a future with new fees, it is currently at a standstill in its negotiations with Amazon to reup a deal that expires on Oct. 1.
Amazon is currently the USPS’s largest customer, generating a reported 7.5 percent of total operating revenue for the courier last year.
But multiple reports last week indicated that the tech titan aims to reduce the number of packages it sends through the Postal Service by at least two-thirds once the contract ends.
However, Amazon claimed that the e-commerce giant has sought to increase its volumes with USPS, not reduce them. The company claims the current rift comes from the agency’s decision to walk away from talks “at the eleventh hour” in December.
The carriers have developed a tenuous relationship in recent years as Amazon has further built out its own shipping network in rural areas—regions where USPS previously was the only courier providing delivery coverage.
Postmaster General Steiner, who took on the role last July, has sought answers for the national service’s continued losses. Net losses totaled $1.3 billion in the first quarter, primarily due to an operating model that paid out a combined $1.6 billion in expenses tied to workers’ compensation, retiree health benefits and debt payments for retirement funds.
To counteract the losses, Steiner has sought to focus on growth. In one such change, the USPS plans to host an auction for retailers, brands and logistics providers to access its last-mile delivery services this year. That move surprised Amazon, which would be put in direct competition with the winning bidders for access to USPS postal facilities.
