Freight rates are being driven to historic highs by the potent effects of a structurally higher-cost transportation environment, heated up by entrenched high fuel prices, capacity constraints, and peak-related fees, according to a report from AFS Logistics and TD Cowen.
The report projects an expensive Q4, with holiday shippers facing record-high ground and express parcel costs, the highest truckload rates since Q1 2022, and LTL rates eclipsing 80% above the January 2018 baseline for the first time ever.
Those are the results of the “TD Cowen/AFS Freight Index,” a snapshot with predictive pricing for truckload, less-than-truckload (LTL), and parcel transportation markets.
“We expect fuel to drive elevated transportation costs for the foreseeable future. Inventories are low and refineries are at capacity, so even if crude oil prices drop in the coming months, diesel and jet fuel supplies must still catch up before prices recede,” says Andy Dyer, CEO, AFS Logistics. “The other key force shaping freight markets is capacity. The holiday rush always places a seasonal premium on parcel capacity, while the continued ascent of truckload rates is the result of steady demand chasing a shrinking pool of trucks.”
For example, the parcel sector could see conditions for a “perfect storm for a pricey peak season,” the report said. Projections for Q4 solidify 2026 as the most expensive parcel shipping year on record, a testament to years of carrier pricing changes designed to maximize revenue in a broad range of market conditions. The fuel surcharge is a prime example, with carriers frequently reindexing surcharge tables since 2021 to not only capture additional revenue as fuel prices rise but keep fuel surcharges high even as actual fuel prices fall.
“While diesel and jet fuel are major costs for ground and express parcel, the fuel surcharge has become a revenue lever for carriers in addition to a pass-through mechanism for covering the cost of doing business,” says Mingshu Bates, Chief Analytics Officer and President of Parcel, AFS Logistics. “Even if crude oil normalizes and fuel prices recede, the effective fuel surcharge will not show a material decrease.”
“For shippers, peak season involves a year-long tight-rope act of balancing volume across carriers to maintain access to capacity when orders really need to move and to limit the impact of demand surcharges that incrementally penalize volume that exceeds baselines established earlier in the year,” says Bates. “The holiday peak also tends to accelerate the trend of alternative carriers continuing to gain share from the large incumbents, as shippers diversify to shield themselves from capacity risk and surcharge impact.”
While frequent changes by parcel carriers have increasingly divorced fuel surcharge trends from actual fuel price movements, LTL is a different story. In LTL freight, the fuel surcharge closely mirrors diesel price trends, setting up a circumstance where sky-high fuel costs and carrier pricing power could send rates to the moon, the report said.
And in the truckload markets, rates are track to reach their highest levels in over four years, despite limited demand signals, according to the report.
