Fuel Cost Surcharges Still Exist, Depend on Company, Distance or Previous Month's Cost of Fuel

With the cost of gas dropping in recent weeks, members of the AGR industry who frequent the AGRR MESSAGE BOARDS are less frequently asking if they should pass the extra cost on to the consumer and instead ask when the surcharges will be dropped.

While the surcharges have not gone away, some, in fact, are decreasing. The PPG surcharge, which went into effect in October, started off at $2.50 per delivery. Based on the national average cost of regular unleaded gasoline, as determined by the Department of Energy, it has dropped to $1.50 per delivery.

Lisa Detwiler, PPG's director of business development, explained that the company chose to use the national average cost of regular unleaded gasoline as the basis for their fuel delivery surcharge because it was the most fair way to service everyone without the complicated task of trying to track the gas prices in each region of the United States. Further, as the surcharge is based on the price of gas from the preceding month, PPG customers can expect it to be around for a bit longer-at least until the monthly national average price for regular unleaded gasoline drops below $2 per gallon, something Detwiler says anyone can check on at the ENERGY INFORMATION ADMINISTRATION home page, which is where PPG goes to get the information they use to determine how much the fuel delivery surcharge is.

Though PPG was the first company to announce a fuel delivery surcharge, many others followed suit. Some companies, such as Import Glass Corp. in City of Industry, Calif., opted to institute a fuel delivery surcharge that mirrored PPG's. Others, however, went their own route.

'Wholesaler AGdistributors instituted a flat $5 delivery fee for runs made to shops more than 30 miles away. The fee is assessed for every delivery run made, regardless of the size of the order and according to managing partner Steve Theisen, it's a fee that is here to stay.

"The fact that the fuel costs are going down doesn't change the fact that we needed to do something a long time ago," he said.

Theisen explained that in the spring of 2005, prior to the havoc wreaked by Hurricanes Katrina and Rita, which caused severe damage to oil refineries in the Gulf coast and the ensuing rise in gas prices, AGdistributors was already looking at the best way to recoup their losses in gas money.

"I was looking at this thinking we should put in a charge to the more remote customers, especially when we're driving out, sometimes more than 30 miles to deliver low margin parts [that] just doesn't cover the [cost of the] fuel," he said.

The timing of PPG's announcement was perfect for Theisen, who was on the verge of making his own announcement when the news broke that the big industry players were doing the same thing.

"PPG kind of paved the way. It was sweet news for us that they did it first. It paved the way. It made it easier for the rest of us to do something like it," he said. "As people have pointed out, [delivery fuel charges are] standard practice in the flat glass industry and has been for a long time. A lot of us need this in the auto glass side."

Because the AGdistributor delivery surcharge is a flat fee and applies only to those shops more than 30 miles away from the distribution cite, Theisen doesn't anticipate reassessing or removing it any time soon. A frequent visitor to the AGRR message boards, he has seen some of the arguments and questions about the fuel surcharges, including whether or not to pass the cost on to the customer, and to that he says "yes."

"I think it's important that everyone understand that no one wants to charge more for business or services, but we're all here to make a profit and if you're not, what are you doing this for? Do what you've got to do and don't worry about what your competitor is doing or not doing, do what you have to do to run a successful business," he said.

He's also concerned about the feelings of shop owners, that some see the extra fees as a way for larger companies-wholesalers and manufacturers-to make more money off the little guy. He points out that there is no room for anyone in the industry to not charge the fees to their customer, on any level.

"Until the margins come back up, I don't know how the industry can be expected to take these kinds of hits. A lot of our vendors started putting surcharges last spring. We as wholesalers can't continue to take the hits without passing it on to our customers," he said.

Theisen doesn't feel that all the forces that converged and made the charges necessary will dissipate any time soon.

"I don't think we'll see gas prices come down far enough or margins on glass come up enough to do away with that," he said.