Postal Service Pinched by Rising Gas Costs

Sunday, June 15, 2008

WASHINGTON — Suburban moms and commuters are not the only ones feeling the bite of rising fuel costs — every time the price of gasoline goes up a penny it costs the U.S. Postal Service $8 million.

"We are definitely feeling the pressure," Deputy Postmaster General Patrick R. Donahoe told The Associated Press.

Transportation cost the post office $6.5 billion in 2007, $500 million more than the year before.

The post office operates the largest civilian fleet of vehicles in the country — 215,000 motor vehicles — and also faces rising costs for fuel from its contract carriers including truckers and airlines.

It's both a matter or costs and usage, Donahoe explained — looking for ways to reduce costs and change use patterns to reduce the need for fuel.

It's easier for the post office to raise rates than it used to be — the price of sending a letter went up a penny to 42 cents in May.

Another price rise is expected next May, but postage increases are legally limited to the rate of inflation.

That limit does not seem to apply to fuel costs which now top $4-a-gallon (3.8 liters) nationwide.

"We've been looking at this, working on this, for the last couple of years," Donahoe said.

One advantage the post office has is the ability to buy in bulk, so it can get gasoline and diesel fuel at a discount.

Donahoe did not say what prices the agency has been able to negotiate, but even though it is less than retail, it still goes up over time.

Highway transport of mail cost the post office $3.1 billion last year, up 5.8 percent from the year before.

Still, the deals allow the post office to set up bulk storage to supply its vehicles, and it provides special credit cards to long-haul contractors so they can also take advantage of the discount rather than simply passing along their higher costs.

Another step is simply packing the mail more tightly.

If you can cram mail that used to go into four trucks into three, that's one truck that's not burning diesel fuel, Donahoe explained.

"The key is really usage. The best price on a gallon is the gallon not used," he said.

Likewise for airplanes, where more tightly packed mail can take up less cargo space in airline holds or on contract carriers such as FedEx or UPS.

Even so, the cost of air transport of mail jumped 7.9 percent to $3 billion last year, at least partly due to rising fuel costs.

Of the many trucks and cars the agency owns, about 190,000 are those delivery vehicles that roam through American neighborhoods.

Donahoe said the post office is introducing global positioning system technology to streamline delivery routes.

"We're ramping up now just to get more efficient on that line of travel," he said. They expect a savings of about 7 percent along improved routes, not just in fuel costs but also in work hours spent delivering the mail.

And sometimes the old fashioned "tried and true" methods can be brought back to save money.

For example, in cities some letter carriers can walk or takes a bus from the post office to their delivery route rather than driving.

At least in some cases, taking the vehicles out and letting people go back to walking saves more in fuel expenses than it costs in terms of extra time spent, Donahoe said.

In addition, in some warm-weather areas such as Florida, Texas and Southern California, consideration is being given to launching bicycle routes, he said.

"Moving away from a vehicle is also environmentally a good thing to do," he said.

Hydrogen fueled vehicles are also under consideration, he said. The agency is working with General Motors on such a vehicle, which could be tested in California where hydrogen filling stations are being established.

"We think it's an opportunity if the fuel is available," Donahoe said.

Hybrid vehicles also can save fuel, but they may not be best for the Postal Service, he said, because the agency tends to keep its vehicles for a long time. While hybrids save on fuel, if they are kept so long the batteries have to be replaced, and that can be quite expensive, he said.

And transport costs are not the only energy problem. Just like homes and offices, the costs to heat and cool and light the post office's 34,000 facilities across the country are also on the rise.