Market Research and Analysis – Using MarketBuilder to inform key decisions
Modeling future prices, flowing quantities, capacity additions, and retirements in the markets you face - how are these factors affected by policy?
Everyone does market research, but with widely varying effectiveness. Various methods have been employed traditionally:
- Gathering traded forwards (Brent, Dubai, NYMEX, National Balancing Point), which have demonstrated to be poor forecasters of future prices
- Plotting historical prices and extrapolating them into the future, as a statistician would. The markets are frequently changing with many factors, such as potential regulatory issues and new production and with the global interrelated nature of the current energy markets, historical reference data does not extrapolate to be an accurate predictor of the future
- Relying on reports by “advisory” consultants, who put out frequent forecasts, often with no rigorous analytical method or transparency
- Subjective judgment by internal staff
One of the key goals in market research and analysis is accurate price anticipation. The methods mentioned previously have not proven to be consistently reliable in pursuing this goal.
What’s needed is a rigorous, time-tested, market-based, fundamental analytic approach that enables you to take account of supply, transportation, and demand for each commodity your corporation needs to analyze in order to make informed decisions. Additionally, it is important that the methodology help you to analyze these factors together while also being able to apply combinations of potential market changes (price, quantity, and capacity additions) to enable what-if analysis and compare the various outcomes.
MarketBuilder (Deloitte MarketPoint’s premier decision-support software solution) enables this type of research and analysis. It has integrated market models for most energy commodities (natural gas, electricity and emissions, oil and refined products, and coal) and a choice of either global or regional scope, such as shown in the figure above. MarketBuilder is a fundamentally-based, market research and analysis solution that models the supply chains in detail for each commodity, from source to distribution. Because each component of the supply chains act as independent, profit-seeking, competitive agents, as they do in the real market, MarketBuilder helps customer analyze realistic market behavior and forecast prices.
Our time-tested models and data enable MarketBuilder to be used as an off-the-shelf application. Additionally, MarketBuilder was designed for ease of use with features that facilitate customers’ use of their proprietary data and knowledge, such as:
- Click and drag of model component objects, facilitating easy customization of the supply chains; it also enables adding proposed market additions, such as new pipelines or generation plants, which helps users analyze how these market changes affect future market behavior and price.
- Microsoft Explorer display and drill down for model transparency, enabling users to easily display data used for any model components and easily alter key data for changing scenarios and what-if
MarketBuilder utilizes sound, industry-accepted economic principals. Combined with its thoroughness, integration and ease-of-use it helps users to analyze many aspects of current and future market behavior under numerous scenarios to enable users to make more informed decisions. With the transparency it provides, MarketBuilder enables users to easily support and document their analysis and conclusions.
As used in this document, ‘Deloitte’ means Deloitte LLP (and its subsidiaries). Please see www.deloitte.com/us/about for a detailed description of the legal structure of Deloitte LLP and its subsidiaries.