fuel surcharge history

Our fuel surcharge was originally intended to offset some of the cost associated with increased gasoline cost that our chauffeurs were incurring at the time. Our original threshold was $2.00 per gallon (for premium fuel, recommended by the limousine manufacturer), in part because we had little history to work with. We had only briefly touched $2.00 per gallon in May of 2001, and then again for short periods in July and August. It wasn't until late August of 2003 that we experienced a sustained period of $2.00+ prices (about four weeks), although prices maxed out at $2.04 before gradually retreating to $1.75 by mid-December.

The "new era" of gasoline pricing arrived at the end of March in 2004, and has not returned to the sub $2.00 level for premium since. Our first surcharge of $1.00 was applied on May 17th, after weeks of steady price increases to a cost per gallon of $2.36. The delay in implementation was consistent with our policy of adding a surcharge not only when the price per gallon reached the threshold price, but exhibited a trend toward maintaining or increasing cost from that point. There was little stability in the market from that day forward, through the end of the year. Although prices dropped to levels as low as $2.10 per gallon in September, they fluctuated wildly and it wasn't until mid-December of the year that we were confident enough in the stability of the market that we removed the surcharge. The price at the time was $2.08 per gallon after a $.12 drop over a week's time.

As 2005 opened, prices remained fairly stable, moving only a few cents up or down over extended periods. By the beginning of March, there was a sudden surge that pushed prices forward on a daily basis, sometimes as much as $.06 from one day to the next. On March 10, as the price of premium reached $2.31 and climbing, the surcharge of $1.00 was added. (It is important to note here that the threshold had been raised from $2.00 to $2.25 per gallon). Prices continued to increase steadily through April due to refinery issues (seasonal blend shift), and our second surcharge level was surpassed on April 1. The surcharge was increased to $1.50 on April 5th as we continued to wait for prices to stabilize. On the 11th, the market finally leveled off, and prices momentarily peaked at $2.64 per gallon. With refineries gradually coming back on-line, prices began to decline going into the summer driving season, at which time we were warned by the industry that supply issues would likely drive prices back up. This was to hold true, and after gradual decreases through April and May - and the reduction in our fuel surcharge back to $1.00 on May 23rd at $2.43 per gallon - prices began to reverse their trend.

On June 2nd, premium began a steady and daily increase, coinciding with the advertised beginning of the summer driving season, and by the end of the month had increase almost $.20 per gallon. On June 27th, with the price reaching $2.56 and still on the rise, the surcharge was again increased to $1.50 per trip. The price would continue to rise to a high water mark of $2.71 per gallon by July 13th before moderating.

One of the issues driving price at this point of 2005 was the hyperactivity of the hurricane season, beginning with Hurricane Dennis (landfall - July 10), and most notably Hurricane Katrina, followed later by Hurricane Wilma. Historically speaking, gas prices were only affected in small degrees during previous weather events, but the 2005 season rewrote the book. Subsequent storms and even the remote threat of "possible" weather events would have deep and immediate consequences.

August 9th would mark the start of rapid-fire price records. Surcharges would also rise at unprecedented rates, with an increase to $2.00 per trip on August 12th ($2.85 per gallon) and another increase to $2.50 per trip a week later on August 19th ($3.10 per gallon). But the big hit was still to come. On the 29th, Hurricane Katrina made landfall, and it only took a couple of days for the effect to hit the market, with prices jumping $.30 in response to refinery and off-shore rig damage, as well as supply disruptions. The $3.41 mark established on September 5th marked the highest price for premium ever recorded in the Chicagoland area, but would be a record for less than a year. It's important to note here that we didn't anticipate premium would go beyond $3.00 per gallon, which is why the surcharge topped out at $2.50. Our current schedule was established later in the fall.

Increased imports of gasoline and a reduction in demand due to price as well as the end of the summer driving season led to a gradual but reduction in prices, which had fallen to $3.13 per gallon by the end of September. Further reductions in prices over the coming months caused changes in the surcharge, to $2.00 per trip on November 1 ($2.84 ppg) and $1.50 on December 1 ($2.46 ppg).

By comparison, 2006 proved to be uneventful, with prices being driven by more predictable means, although the market DID react to the prediction that 2006 would experience a hurricane season comparable or more severe than the previous year, a prediction that would prove to be completely wrong.

Significant dates for 2006 would be March 20, when the surcharge was increased to $2.00 per trip ($2.87) on supply concerns - again with refinery changeover to seasonal blends; April 11, surcharge increase to $2.50 ($3.08) on continued supply concerns; April 26, surcharge increase to $3.00 ($3.33) - more of the same; July 7, surcharge increase to $3.50 ($3.53) - summer driving seasonal increase due to increased demand; and finally the highest recorded price ever on August 7th ($3.65). Gradual decreases brought prices down to $3.28 by September 8th (end of the summer driving season), when the surcharge was reduced to $3.00 per trip. Additional reductions in the surcharge followed on September 27th to $2.50 ($2.85), October 4th to $2.00 ($2.74), and October 13th to $1.50 ($2.63). Prices would stay fairly level through the rest of the year, closing at $2.65 for premium on December 29th.

The new year brought its own set of circumstances, most involving supply concerns due to "geopolitics". Although we actually reduced the surcharge to $1.00 in late January, all indications are that this year will surpass all previous years for top end price. Shortly after the January adjustment, the surcharge was increased to $1.50 on February 9th ($2.54), and again on March 2nd to $2.00 ($2.82), April 2nd to $2.50 ($3.04), and April 17th ($3.33). Oddly enough, these increases are not currently tied to oil price or supply, but simply on overall gasoline demand. As we move forward from here, it doesn't appear that this situation will get any better. We are already 2 months ahead of last year in price per gallon.

Our surcharge was calculated to help the chauffeur offset a portion of his cost to operate the limousine. It is not intended to help the company in any way. This is why we opted for a surcharge in lieu of a price increase.