CALGARY — Canadian Pacific Railway Ltd. is considering adding fuel surcharges to its freight rates, following a recent jump in the price of oil, the Globe and Mail reports.
“We’re looking at the application of some fuel surcharges,” Ed Dodge, the Calgary-based railway company’s chief operating officer, told reporters in Calgary Friday.
Mr. Dodge, who spoke after CPR’s first annual general meeting since it was spun off last September from parent Canadian Pacific Ltd., said the company’s previous fuel surcharges automatically expired in February after the price of West Texas Intermediate (WTI) oil slid below $22 (U.S.) a barrel.
Since then, however, the price of oil has climbed in response to the rebounding economy and tensions in the Middle East, at one point topping $28.
It has been easing over the last week, however, falling $1.52 yesterday to end the week at $23.47.
Mr. Dodge did not elaborate on the amount of a possible surcharge, but the last time CPR added one, in December, 2000, it was set at 3 per cent of shipping rates.
The U.S. benchmark oil price at the time was in the high-$20 range after trading well above $30 for several months.
If CPR moves ahead with a fuel surcharge, it would join other transportation companies such as Air Canada in hiking prices in response to higher fuel costs.
Air Canada’s plan to double its existing fuel surcharge to $30 from $15 for a round-trip domestic flight took effect Thursday.
Mark Hallman, a spokesman for rival Canadian National Railway Co., said CN does not have any fuel surcharges in place and does not anticipate adopting one in the second quarter.
Mr. Hallman explained CN uses a formula for determining fuel surcharges in which the company has the right to implement one if WTI oil averages more than $24 for one calendar quarter.
That hasn’t happened yet, he said.
CPR chief executive officer Rob Ritchie said, despite the rise in fuel costs, the company is “comfortable” with analysts’ expectations for the first quarter. Results are expected to be released on April 25.
Analysts are calling for earnings of 39 cents a share in the first quarter, according to a Thomson Financial/First Call poll of four analysts.
Mr. Ritchie also addressed the question of whether CPR is a consolidation candidate, following the merger earlier this month of its sister company PanCanadian Energy Corp. with Alberta Energy Co. Ltd., saying he did not believe that was the best way to go.
“I don’t see it as a positive step forward at this stage,” he said.
Both CPR and PanCanadian were part of the Canadian Pacific conglomerate before its breakup.
He said to avoid being a takeover candidate, CPR will try to increase its earnings and, therefore, its stock price.
“That should make us a very strong railroad and not one subject to people who wish to buy shares at bargain-basement levels.”