Tuesday, November 11, 2008

The Truth About "Fuel" Surcharges

Today Bob Murphy at his blog site posted an email from a reader who was concerned about a "fuel tax" surcharge that was tacked on to the price of her flight.

This got me thinking about surcharges in general, and I posted the following comment at Bob's site:

When I book an airline, hotel etc., I always look at the final price versus the components.

Bob, as you know factors of production are determined by the consumer price, and not the other way around.

With clients I always recommend they create such price charges as gas surcharges, and the like, to establish a track record of doing such, so that in the case price controls are ever instituted, long established "fuel surcharges" might be allowed to be passed through when an increase in the ticket price would not. Bureaucrats live for this type minutia hair splitting. I suspect that if you dig deep, calling an airline price hike a "fuel surcharge" probably means that the airlines aren't paying some type of ticket tax on the increase, or some other tax.

Of course, you can't be idiotic about it and charge different "fuel charges" for the same destination.

To all consumers, I say don't sweat just what they call it, just evaluate the final price.

In the Obama Era, with more and more regs, there are bound to be more and more oddball justifications for what are basically price hikes.

No comments:

Post a Comment