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United Parcel Service, Inc. (NYSE: UPS) shares moved higher today after dropping more than 7 percent so far this week. The premeir transportation company has seen its shares fall as the price of fuel has skyrocketed. Investors are concerned that higher fuel costs will hit its margins and dramatically hurt the firm's profits in future quarters. As a result, investors have pushed shares to new 52-week lows of just over $60 per share.

The price of oil surged to a new record of $145.75 before falling back slightly. Oil cartel OPEC expects the price of oil to reach $170 per barrel before the end of the year on a combination of concerns regarding a weak U.S. dollar, surging oil demand and fears about supply disruptions in the Middle East and Africa. However, many others believe that the current rise in oil prices is due to speculation that will end in a bubble similar to that of Internet stocks or real estate.

In the meantime, United Parcel Service will be hit in two ways. First, higher operating costs will put pressure on its margins and likely lower its earnings per share. Secondly, it will be forced to raise prices to compensate, which may lead to fewer cash-strapped customers using its services to send packages. Finally, lower consumer spending means that less items are due to be shipped from companies to individuals. Combined, this is all bad news for UPS.

Fortunately, expectations are already very low for United Parcel Service. It should come as no surprise that oil prices are rising and that the margins of transportation companies will be hit. As a result, a lot of the problems associated with higher oil may already be priced into the stock. What remains is a measure of expectations - how much will oil prices rise and affect margins. This remains to be seen, but it appears that many are expecting $170 per barrel oil by the end of the year at worst.

Shares of United Parcel Service rose $1.18, or 2.02%, to $59.72 on the news.

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