Gas Prices 101: What Is a Fuel Surcharge as Uber and Lyft Implement Change?
In recent months, U.S. consumers have experienced inflation, shrinkflation, and now — surcharges. But what is a surcharge, and how is it helping businesses while, at the same time, making waves with consumers’ budgets?
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What Is a Surcharge?
In simplest terms, a surcharge is an extra payment added to a typical price. For instance, a business might add a surcharge to a purchase made by credit card — in states where it is legal to do so — to cover processing fees.
Airlines have been implementing fuel surcharges for years to compensate for volatility in the market and to cover costs during peak travel times.
While these costs could be factored into the cost of doing business — and are, in many industries — the volatility of fuel prices justified airlines to add fees for fuel without overtly raising their prices. These surcharges were not necessarily fare increases, but, ostensibly, a “temporary fix to market conditions,” wrote travel news site One Mile at a Time.
Surcharges save the airline from recalculating fares for each route, as the price of fuel fluctuates. Instead, they can add a blanket fee on all routes from any specific region.
Ground Transportation Providers Follow Suit with Surcharges
Following the model of major U.S. airline carriers, ground transportation apps Uber and Lyft recently introduced fuel surcharges. Uber customers will now pay a surcharge of 45 or 55 cents for every Uber trip and 35 to 45 cents for every Uber Eats order, depending on location. The surcharges will go directly to Uber drivers to help cover rising gas costs, according to a news release from Uber. The company said the surcharge will last for at least 60 days, as of March 11, 2022, and will then be reassessed based on market conditions.
The surcharge will not be in effect in New York City, where drivers already received a 5.3% pay increase when the city’s mandated minimum earnings standard rose. Many NYC Uber Eats drivers use bicycles instead of cars, avoiding fuel costs altogether.
Just three days after Uber introduced the fuel surcharge, competitor Lyft did the same. The company announced on Mar. 14 that they would provide drivers with the funds from the surcharge to aid in rising gas costs eating into their business profits. At press time, Lyft had not revealed the price of the increase.
Planning for Surcharges
Just as consumers must account for rising gas costs today when they drive their own vehicles, it’s important to keep fuel surcharges in mind when budgeting for a trip — by land or air. For longer trips, fuel surcharges for ride share services shouldn’t make much of a difference, as they represent a small percentage of the cost. But for drivers, those 35 to 55 cents could add up as they help defray the cost of filling up their gas tanks.
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