Products are not made in the same place where they are required. More often than not, the production house or the supply chain will be in a completely different place from that of the place where there is a requirement. It is the traders who distribute the product from the place of production to various locations as per the demand. In fact, an apt example would be a commodity like oil, which is predominantly produced in the Middle East and yet it is sold more in the Asian countries.
There are various factors affecting the demand supply equation of commodities and energy products, both long term and short term. On a longer term, factors like a country’s economy, their advancement in technology and the changing policies of their ruling government can have an impact on the demand supply equation. However adverse climatic conditions or unfavorable political situations, can cause temporary disruptions to the demand supply equation in these countries.
The firms that trade in physical commodity do not just have to prepare for the long term governing factors but also be ready to face any challenges that might arise out of the short term factors.