Will jet fuel prices rise 30%+ from March 2026 levels by December 2026?
Current Prediction
Prediction History
Fuel curve has moved up materially since March — Q1 actual $2.73/gal vs $2.40 forecast, and Q2 assumption $4.10-4.15/gal already clears the 30% threshold. Management's explicit caveat that $4 EPS requires 'lower fuel prices and/or stronger revenue' confirms elevated curve. December mean-reversion keeps probability below 0.30.
Why This Question Matters
Fuel is the largest external stress variable, and Southwest has no hedges for the first time in decades. The Stress Scanner found the balance sheet STABLE but flagged fuel hedging discontinuation as the key P&L amplifier. A 30% fuel spike could reduce EPS by $2.00-2.50, potentially making the $4+ guide unachievable regardless of transformation execution.
Prediction Distribution
Individual Predictions(9 runs)
The fuel curve has moved meaningfully up since March — Q2 assumption of $4.10-4.15 is already above the 30%-from-March threshold of ~$3.51. This is material directional evidence that probability should rise from 0.18. However, the market resolves on December 2026, and jet fuel typically sees seasonal softness in H2 Q4. Even so, the curve elevation evident in Q2 guide is a meaningful signal the spot environment is higher than the analysis previously modeled. Shift from 0.18 to ~0.26.
Conservative bear-case: while Q2 guide assumption is elevated, management's Q2 assumptions often build in conservative buffer. The forward curve in April doesn't lock in December spot. Historical seasonality favors fuel softening into December. A sustained 30% spike requires either a geopolitical shock or OPEC+ supply discipline that continues into winter — possible but not the base case. Shift from 0.18 to ~0.22.
Aggressive update case: the Q1 → Q2 fuel assumption jump from $2.73 to $4.10-4.15 is a 50% increase in ~6 weeks. This is not a typical seasonal ramp — something structural has changed in the fuel market between March and April. Management would not volunteer such a dramatic upward revision without conviction. If Q2 settles at $4.10+ and maintains through summer, December sustaining $3.55+ (30% above March) becomes more plausible. Upgrade probability to ~0.28.
The Q2 guide fuel assumption is a meaningful signal that the current fuel environment is above our March analysis baseline. 30% sustaining through December is plausible but not the base case given seasonal patterns. Shift from 0.18 to 0.24.
Management explicitly conditioned the $4 FY guide on fuel relief or revenue tailwind. That's a signal that the current fuel path, if sustained, would compress the $4 guide. The Q2 $4.10+ assumption already clears the 30% threshold. Shift from 0.18 to 0.27 — meaningful upward revision given the explicit fuel curve elevation signal.
Fuel is exogenous and our analysis has no independent edge on fuel prices. The Q2 guide assumption is directional evidence but not predictive of December. Seasonal pattern suggests retreat toward $3.30-3.50 range into winter. Modest update from 0.18 to 0.23.
Q2 fuel assumption $4.10-4.15 clears 30% threshold. Curve has risen. Shift from 0.18 to 0.25.
Fuel elevated in Q2 but December seasonal trough. Uncertain sustaining. Shift from 0.18 to 0.22.
Material Q2 fuel jump signals elevated environment. Management caveat confirms. Shift from 0.18 to 0.26.
Resolution Criteria
Resolves YES if the average weekly Gulf Coast Jet Fuel spot price exceeds 130% of the March 2026 average at any point between April-December 2026, sustained for at least 4 consecutive weeks.
Resolution Source
EIA Gulf Coast Kerosene-Type Jet Fuel Spot Price weekly data
Source Trigger
Jet fuel cost per gallon +30% from current — major EPS impact without hedges
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