USPS seeks January approval for 11% Priority Mail price hike as fuel costs climb

What USPS is asking for

The cash strapped Postal Service wants the green light to push domestic Priority Mail and package rates up 11% in January to counter higher fuel costs. Any adjustment requires sign-off from the Postal Regulatory Commission. USPS also said it does not plan to increase first class stamp prices in January, after a July step up to 82 cents from 78.

That 11% target builds on a temporary 8% surcharge put in place in April. Alongside priority rates, USPS is proposing to lift overall domestic shipping service prices by an average of 5.9% and is raising international delivery prices by an average of 7.9%.

Why the pressure is rising

Fuel is driving the bill. USPS says transportation expenses jumped by $225 million over the 12 months ending Sept. 30 because of higher fuel costs.

The business backdrop is still heavy. The agency posted a $6.5 billion loss for the year, compared with a $9 billion net loss in the prior 12 months. Since 2007, cumulative net losses have topped $120 billion. This year, first class mail - its most lucrative offering - declined to its lowest point since 1965 as communication shifted online, while USPS still covers the expense of nationwide delivery.

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The strain and what comes next

Postmaster General David Steiner says the agency's business model is broken and that legislative assistance is necessary to restore operations. USPS, on Tuesday, requested $2 billion from Congress to address what it says are imposed unfunded requirements, and warned that absent legislative action it would make significant cuts to retail post offices and other reductions.

Cost controls are already in play. In May, USPS halted nonessential outlays on travel, office supplies and consulting, and earlier this year temporarily put employer contributions toward a federal pension program on hold. A new Democratic-led Congress takes office in January and will decide whether to step in following a two-year period in which Republicans convened multiple hearings on USPS finances.

What this means for your portfolio

If regulators sign off, shipping costs rise at home and abroad - with a proposed 5.9% average increase for domestic services and international prices moving up 7.9% on average. The policy path now runs through the Postal Regulatory Commission and the incoming Congress. Watch for how rate changes and any funding support shape delivery costs and service levels that feed through logistics, retailers, and e commerce margins.

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