Many of my commercial customers are interested in knowing what I think the range of prices may be for a coming year so they can bid their jobs accordingly. I suspect that you're no different from any of them. Fuel changes can greatly affect your per acre expenses.

A 25-cent per gallon increase can raise your hourly plane cost $10-$12. Which ends up costing you $100-$120 per day, per plane. That's a major impact in anyone's book.

What I've been able to do for my diesel customers is offer fixed pricing by month for as long as a year. I have different options available to me for this such as futures pricing, calls, puts, and forward contracts.

My stumbling block in offering my aviation customers a similar program is that Jet Fuel is not traded on the stock exchange. Heating Oil (#2) is and it's easy to convert these numbers for premium diesel and on road diesel.

I can make certain assumptions with the relationship of #1, K-1 or Kerosene to #2, however these products are very volatile at different times of the year. Assuming we know what normal is, K-1 is generally 10 cents more per gallon than #2. Except when...any number of scares, shortages, or weather changes can widen that spread to 30 or 40 cents per gallon!!!

Diesel fuel and gasoline are traded on the New York Stock Exchange (NYMEX) every weekday from 10 am to 3 pm EST. They're traded as Heating Oil and Unleaded Gas. After the close of these markets we receive rack pricing at all the major terminals in Michigan from companies such as BP, Sunoco, Citgo, Mobil and Marathon. They generally follow the NYMEX and adjust their prices accordingly.

The difference between the Michigan terminals and the NYMEX is known as our "basis". This is the magic number that changes the most. The more volatile the market is, the bigger our basis. This is how the major oil companies can protect themselves against big movements. It is not unusual for the NYMEX to go up 2 cents during the day, and our terminal prices go up 4 cents...or the NYMEX goes down 2 cents and our terminal pricing only goes down 1 cent. Do you see the pattern? How do we offset these changes?

Difficult, but possible with diesel fuel and gasoline, but unfortunately we're concerned with Jet Fuel and AvGas!

On top of the concerns mentioned above affecting our fuel markets, aviation fuels add their own unique set of twists. Our pricing for these fuels are calculated only once per week. The changes on the NYMEX are taken into consideration, as well as nationwide inventories at the major airports and anticipated demands in travel. If someone feels that inventories are too low and travel will be up, and the NYMEX was down 5 cents in heating oil for last week...we could see Jet Fuel up 4 cents.

If you're confused, welcome to my world! I'm sharing my anxiety. What I'm really trying to do is give you a sense of the factors that shape our markets, the options we have available, or not and the difficulty I have in finding something solid to hang my hat on. Here are my thoughts on where I think aviation prices will be for the coming year.

First and foremost, there is one major influence on our current pricing: the weak US dollar. Crude oil is traded in the world market on the US dollar. Two and a half years ago when OPEC announced they wanted a floor on crude around $24-$25 per barrel they basically wanted to keep their cash coming in at those levels. The dollar has lost around 30% in value since then. So, for OPEC to receive their same dollars today, the floor is roughly $32 per barrel! As a rule of thumb, for every $1.00 per barrel change in crude we can expect around a 6-cent per gallon change in fuel prices.

With this in mind, and crude trading around $34.50 per barrel, the best we can hope for is around a 15-cent drop in the near future. Based on this assumption, that would put Jet A around $1.20 - $1.25 per gallon and AvGas around $1.65 - $1.70.

My gut feeling is our markets shouldn't be very volatile for the spraying season, however I would expect it to mirror last years markets. Without researching, I think last year we set the lows at the beginning of the season around $1.06* - $1.09* per gallon for Jet A and we ended the season around $1.36 per gallon. My best-case scenario for this season for Jet A is a range between $1.15* and $1.40* per gallon. My worst-case scenario is $1.30* - $1.55* per gallon.

My best-case scenario for AvGas is $1.60*- $1.80* and my worst case is $1.75* - $2.00* per gallon.