Canada has long been known as an abundant provider of energy resources, from timber and coal to oil and gas; but do you know how dependent our economy is on our resource-rich status? I’ll be the first to admit that even I was in the dark when it came to Canadian energy resources. Here’s a breakdown of how energy affects our overall economy.
Energy Protected Us In The Recession
While the rest of the world, including our once-profitable neighbours to the south, struggle to keep their economies afloat, Canada has somehow managed to weather the financial crisis better than most. Why have we been spared? Experts say that our ability to coast through the crisis was due in part to “sound home mortgage practices” and “prudent federal fiscal management.” These are not my words – they are, rather, the words of Gwyn Morgan from the Globe and Mail. But I agree with them. It wasn’t luck that got us through that mess.
Supporting Exports and Employment
The article points to Canada’s status as one of the world’s largest resource exporters; According to Natural Resources Canada, our energy, mining and forestry sectors generated new capital investment of $95 billion in 2010. On top of that, their exports totaled $200 billion. When you compare trade data from natural resources to those from manufacturing, there’s really no comparison. Natural resources show an $84-million net balance, while manufacturing shows a $60-million deficit. Not good.
So which sectors are the biggest contributors to Canada’s trade? Those would be oil and gas, which are employment powerhouses, providing jobs for more than 550,000 people.
Energy And Provincial Equalization
Are you familiar with the terms”have” and “have-not” provinces? I was surprised to learn that my home province of Ontario is now considered as the latter – and energy is a key factor. The four oil- and gas-producing provinces – that is, B.C., Alberta, Saskatchewan and Newfoundland and Labrador – are the only provinces contributing to equalization. The rest receive equalization grants ranging from P.E.I.’s paltry $75-million payout to Quebec’s $2.3 billion.
It is for this reason that economists argue in favour of oil sands projects. Experts, like Morgan, say that the oil and gas industry is “crucial to Canada’s economic and social fabric,” but that that vitality is being threatened by a growing oil price discount. And why? Simply put, because we lack export pipeline capacity.
I’m not here to argue in favour or against anything. I’m a firm believer in knowing more before taking a stance. Sure, this is just one small part of the argument, but it makes it clear that we need to consider the big economic picture before writing off our biggest contributor.