Impact on gross domestic product
In 2017, we exported CA$97 billion worth of oil and gas, and as of Q2 2018, the sector accounted for 15% of Canada’s merchandise exports. The energy sector as a whole accounts for almost 11% of gross domestic product (GDP), with 6.25% of GDP provided by the oil and gas sector.
Impact on payments to government
Upstream oil and gas averaged CA$12 billion tax contributions to government revenues over the past five years. This represents more than 11% of all operating revenues earned by the Canadian government. The normal levels of total industry revenue for producers and the various levels of government are around CA$100 billion annually. As a result of declining commodity prices, and to a lesser extent decreased natural gas exports, the amount of taxes paid by oil and gas companies has fallen by 38% over the past 10 years.
Although 80% of Canada’s oil and gas production comes from Alberta, other major producers include British Columbia, Saskatchewan, Manitoba and Newfoundland. A vibrant oil gas industry not only benefits Alberta and other producing provinces, but Canada as a whole in the form of tax contributions and transfer payments.
Impact on employment
More than 3,400 companies outside of Alberta supply goods or services to the oil sands sector alone, with more than 1,500 from Ontario. Direct and indirect employment across the country in the oil and gas sector is now 533,000, down from 644,000 in 2015.
Impact on foreign investment
The recent plight of the Canadian oil and gas sector has had repercussions on investment in the country. Capital spending in the oil and gas sector in the United States rose 38% to US$120 billion last year. Investment in the same sector in Canada was CA$45 billion, down from CA$81 billion two years earlier. The level of investment in oil and gas extraction dropped by 7.4% to CA$162.2 billion, as direct investors from abroad sold some of their assets back to Canadian investors, mainly in the oil sands. The S&P/TSX Energy Index has dropped 7.8% this year so far, compared to a gain of 1.3% for the comparable US index. Energy deals in Canada have dropped by 16% for the first nine months of this year, compared to a surge of 72% in the United States.
To attract investment, the energy industry needs greater certainty. Provincial and federal governments need to work together to define rules, policies, regulations and ensure that they are understood and upheld. By creating a predictable and stable environment, governments will provide an opportunity for all industries to attract local and international investors.