Tom Kloza, OPIS analyst extraordinaire, makes 10 predictions for the coming year. (This is our synopsis, so please click on the link read all of his good stuff.)

1. Gas prices to move higher 2/15 to about May, but not as high as the past two years. Average US retail $2.50-$2.80/gal. on this move.

2. US to see $70/bbl crude oil this year, and that before we ever see $50/bbl, but may see both in 2007.

3. National average for retail unleaded to stay below the record $3.057/gal. in 2007.

4. Spring 2007 to bring out the “talking heads” predicting $100/bbl crude and $4 gasoline as we get the typical springtime rise in prices.

5. CA, WA, OR & HI will see $3/gal ave. unleaded, but not that high east of the Rockies.

6. Congress to hold hearings on price gouging.

7. Ethanol to see its US market share grow.

8. Any hint of recession changes everything, and it will be really bad.

9. Diesel fuel to be the highest growth product. Look for $0.20-$0.40 more than gasoline at the pump.

10. Summer 2007 to see hurricane rallies, but will give all back once traders think the season is over.

By Jeff Miller

FLEET MANAGERS AND CFO’S OFTEN LINK THEIR DECISIONS ABOUT HEDGING PRICES WITH THEIR CORPORATE BUDGET PROCESS. HERE ARE SOME TYPICAL QUESTIONS THAT I GET:

Q: I am worried about fuel prices later this year, and I like the idea of hedging, but isn’t it too late? We are already part way through our fiscal year, and the budget is set. We have nothing in there to pay for a hedge.

A: A hedging program can be designed to fit the remaining part of a fiscal year. Many executives are surprised to learn that fuel protection programs might not require any premium payment. They can protect their budgets even if there is nothing allocated for a premium payment.

Q: My fiscal year does not begin until April. I am interested in protecting my fuel budget, but we can’t do anything until then. Will prices still be attractive in April?

A: A fuel hedge can be set for any time period the customer needs. It is possible to lock in a low-cost or zero-cost program right now, even though it does not take effect until April. Who knows what prices will be in April!

THERE ARE TWO KEY TAKEAWAYS ON FUEL BUDGETS AND HEDGING:

Why hedge? Because a fuel hedge is the only way to assure that the budget is met, even if prices once again spiral out of control.

When to hedge? The best time to act is when risk is high and prices are attractive. It has been a fortunate period for fuel prices — a benevolent hurricane season and warm weather. Managers who are beating their budgets can make sure it stays that way, even if this year’s weather is not as friendly.

The EIA reports that crude oil inventories were down for the fourth straight week. That’s not the good news, though.

Inventories of refined product grew much faster than the boys in the back room had calculated. So… prices will be going where?