Fuel price increase impacts shipping costs

In what appears to be a strong indication of higher commodity prices in the next few weeks, a major shipping company yesterday moved to obtain permit that would increase its fuel surcharge in Hawaii and the Mariana Islands.

The move by Washington-based CSX Lines to apply for a one percent increase in the shipping company’s Hawaii and Guam tariffs was seen to aggravate the burden carried by CNMI wholesalers who transport items from the U.S. to the islands.

CSX Lines is seeking the approval of the Surface Transportation Board to increase the fuel surcharge in its Hawaii and Guam tariffs from 2.25 percent to 3.25 percent effective March 26, 2000.

Saipan Seaport Manager Tony Cabrera said this additional charge will be eventually passed on to wholesalers through increased shipping rates from the mainland U.S. to Guam and the Northern Marianas.

Mr. Cabrera explained that the Federal Maritime Commission gives shipping companies the option to apply for a raise in fuel surcharge in the event that prices of petroleum products increase to intolerable levels.

“This is another expense on the part of the shippers and wholesalers but shipping companies are without a choice but to pass on the additional cost brought about by high prices of fuel or they will suffer,” he explained.

According to CSX Lines marketing and pricing director Marvin R. Buchanan, the recent sharp escalation in world and local prices of petroleum products prompted the company to increase its fuel surcharge due to the recent.

Mr. Buchanan said fuel costs have climbed steadily since the Spring of 1999 because members of the Organization of Petroleum Exporting Countries have succeeded in limiting the world supply of oil.

He added that this resulted to fuel prices increasing to the levels recorded shortly before and during the Gulf War in the early 1990s.

“As we have previously demonstrated, we will continue to monitor fuel prices on a monthly basis and adjust the fuel surcharge up or down based on cost trends,” Mr. Buchanan pointed out.

Two leading distributors of imported products in the island — Marianas Pacific Distributor Inc. and Pacific Trading Co., Ltd. — have agreed that the move by shipping companies to increase fuel surcharge will have a heavy impact on the cost of transporting goods from their point of origin to the CNMI.

This early, Northern Marianas distributors of items imported from the mainland United States and other countries have started feeling the pinch of skyrocketing oil prices, reporting a sharp increase in the cost of moving the commodities from off and within the island.

Barely a month since Mobil Oil Marianas and Shell last raised the pump price of petroleum products, Pacific Trading Co. Ltd., has already noted a significant increase in the transportation of its imported items from the Saipan port to the warehouse.

Higher fuel costs for transporting products will eventually prompt wholesalers to raise delivery charges. Exporting companies are also expected to consider raising their destination charge for shipment of products.

Pacific Trading estimates the increase in transportation cost to reach six percent since the first round of oil price hike was effected last month.

Charles Cepeda of Pacific Trading projects that wholesalers may soon pass on the added cost to retailers. End-consumers will eventually be burdened to carry the additional expense through increased shelf prices of commodities.

At present, local wholesalers like the Pacific Trading are taking steps to avoid passing on the additional transportation cost to retailers in order to block any increase in the mark-up prices of imported commodities.

However, continued increase in both world and local prices of petroleum products will eventually force distributors to adjust the prices of the items they sell to retailers in order to at least break-even.

Economists are predicting that oil prices will remain high for months due to the depletion of oil inventories by the world’s richest countries to the lowest levels in four years.

Drastic reductions in oil inventories in the U.S., Europe and Japan created a shortfall in global petroleum supplies of about 2.5 million barrel per day.