When I mention the topic of hedging to terminal operators, those without product ownership think they are ruled out. Not so. While attention is often given to managing the value of commodities in storage through NYMEX based futures and options, little mention is made of applying these same techniques to operating margins.

Terminals generate operating margins by the throughput and storage of product. However, market conditions may act as a disincentive for your customers to store product. During these times, inventories decline along with your margins. Knowing this relationship exists, you can develop hedging strategies to offset the loss.