The Dreaded Fuel Surcharge

[crewsweeper]

57 minutes ago, richfret said:

Every time I listen to the TV news and there is the mention of an oil issue, the price at the gas pumps jumps up immediately and stays that way for a few days.  Then the price comes down and we wait for the next problem.  It's a nice way to make a few extra bucks and gives justification for the action taken.  I look at it the same way with the oil surcharge.  If need be, it can be established and difficult to dispute.  After all, we saw it in the news so it has to be true.  Then the problem goes away.  The surcharge is removed and every one is happy again.  It's called economics in a strange sort of way. 

Gasoline prices are based on the refinery prices.  When the base fuel paid at the refinery rises there is a corresponding rise in the gasoline prices at the pump the next time a delivery is made.  But this typically takes 5-10 days to filter through. Anytime you see pump prices shoot up the day of or day after a large increase in oil prices, someone is gouging.

[Organized Chaos]

7 hours ago, Joebucks said:

You can raise rates by $150, and no one would bat an eye. If they added a $80 separate line charge, well than that is the worst thing that could ever happen.

 

There is a true psychological tactic when it comes to setting prices. It's why gas stations tack on 9/10 of a cent to the price per gallon instead of rounding up to the nearest penny. It's why stores price items at $X.99 instead of rounding up to the nearest dollar. Psychologically, people view these prices as cheaper and a more attractive buy. If you raise the cruise fare up front, it's much more likely to be accepted. Many won't even notice. But if you add a fee on the back end that wasn't there before, it becomes much more noticeable.

 

5 hours ago, crewsweeper said:

Gasoline prices are based on the refinery prices.  When the base fuel paid at the refinery rises there is a corresponding rise in the gasoline prices at the pump the next time a delivery is made.  But this typically takes 5-10 days to filter through. Anytime you see pump prices shoot up the day of or day after a large increase in oil prices, someone is gouging.

 

Yeah, the hike in gas prices should correspond with the next delivery (when they themselves actually purchase the higher priced gas), but it rarely works that way. At least in this region it doesn't. Gas stations raise their prices long before they fill their tanks again. The Saudi attack happened on a Saturday and the gas stations around here raised their prices by Monday and Tuesday. And it wasn't because they all just filled their supply tanks. For many years, they've taken full advantage of every excuse that's been given to the public just to raise their prices. When one excuse doesn't work, the "experts" come out with another one.

[chengkp75]

And as I say whenever the fuel surcharge is brought up, there is no direct correlation between the price of crude and the price of marine residual fuel.  While Carnival Corp apparently does not use fuel futures to stabilize fuel prices, a rise in crude prices caused by the shortage of Saudi production, will likely still take months to be felt in the bunker fuel market, and even then it may not be that great an impact.

[elcuchio24]

On 9/27/2019 at 6:19 PM, chengkp75 said:

And as I say whenever the fuel surcharge is brought up, there is no direct correlation between the price of crude and the price of marine residual fuel.  While Carnival Corp apparently does not use fuel futures to stabilize fuel prices, a rise in crude prices caused by the shortage of Saudi production, will likely still take months to be felt in the bunker fuel market, and even then it may not be that great an impact.

 

I wonder why they sited it as the major factor for lowering their forecast then?

[chengkp75]

1 hour ago, elcuchio24 said:

 

I wonder why they sited it as the major factor for lowering their forecast then?

Because prices for fuel have been rising, even before the Saudi event.  I'm not saying that fuel prices won't rise, I'm saying that events like the Saudi air strike didn't have anything to do with their projection of rising fuel costs.  The biggest driver in rising marine fuel costs is January 1st, when fuel must be low sulfur (0.5%) or use a scrubber.  This fuel is about 30% more expensive than higher sulfur fuel, and I don't believe Carnival has completed installation of scrubbers on all ships, so they will feel pain at the pump.  I have my suspicions that Carnival was hoping that the IMO would delay the implementation of the lower sulfur fuel, and had based their previous projections on that.

[elcuchio24]

22 hours ago, chengkp75 said:

Because prices for fuel have been rising, even before the Saudi event.  I'm not saying that fuel prices won't rise, I'm saying that events like the Saudi air strike didn't have anything to do with their projection of rising fuel costs.  The biggest driver in rising marine fuel costs is January 1st, when fuel must be low sulfur (0.5%) or use a scrubber.  This fuel is about 30% more expensive than higher sulfur fuel, and I don't believe Carnival has completed installation of scrubbers on all ships, so they will feel pain at the pump.  I have my suspicions that Carnival was hoping that the IMO would delay the implementation of the lower sulfur fuel, and had based their previous projections on that.

 

Gotcha. That makes alot of sense, more than the shorterm interruptions. Be interested to see if they mention the scrubber expense on the next call...

[chengkp75]

2 hours ago, elcuchio24 said:

 

Gotcha. That makes alot of sense, more than the shorterm interruptions. Be interested to see if they mention the scrubber expense on the next call...

Scrubber install has been underway for two or three years, so that is most likely a capitalized cost and has been figured in.

[ALWAYS CRUZIN]

Many newer ships underway or being built will be running on Liquefied Natural Gas (LNG),  As for fuel adjustment cost. So what. If you are worried about that. Do not do a cruise. You have no control over it. 

[skiorcruise]

I think I paid the fuel surcharge on one cruise back in the 07-09 time frame.

 

There is a local radio talk show host who goes off on the oil companies from time to time.  He gets an oil executive on, rants and raves about the apparent disconnect between the price of crude and the local price of gasoline, and gets the answer "Doug, you just don't understand the oil business".

 

I don't understand it either.  My county, and the one to the south have 3 or 4 refineries.  The county to the north, south and  southwest have gas prices 7 to 15 cents cheaper than I do.  Taxes are within 2 cents per gallon.  I guess I just don't understand the oil business either.