Few deny oil sands development is benefitting Canada economically. There is disagreement, however, about the magnitude of the impact, the principal beneficiaries, and whether the economic bang outweighs potential negative social and environmental consequences.
1. Resource extraction fuels the global economy.
Industries focused on developing the world’s natural resources generate significant taxes and other revenue for governments in the countries where they do business. A 2007 Harvard University report (PDF) noted that money from oil and gas, forestry, coal and other extractive industries helps underwrite government spending in many developing countries on public sector programs, including education, health care and infrastructure.
Revenue takes the form of royalties, income taxes and other profit-sharing arrangements. Natural resource development companies impact local economies through procurement of goods and services, production and sales employment and community investment.
2. Oil sands development is benefitting Canada’s economy – now.
According to IHS CERA, economic benefits from oil sands can be measured by the jobs it creates, the goods and services it purchases from other services, and the royalties and taxes paid to government. The oil sands are often characterized as a future proposition, which will bring great economic benefits if development is allowed to continue and grow.
The reality is that current levels of development are already boosting Canada’s economy. In 2014 research (PDF), IHS CERA estimated that in 2012, oil sands resulted in almost 480,000 jobs in Canada and $91 billion in Canadian gross domestic product (GDP), or about 3 per cent of total Canadian employment and 5 per cent of the GDP. Royalties and taxes collected from oil sands and spin-off activities in 2012 topped $28 billion (or about $812 per Canadian.)
In 2013, Suncor alone contributed a combined $4 billion in royalties and taxes for governments. Our combined spending on goods and services in 2013 totalled $11.5 billion.
3. Oil sands’ economic contribution is often understated.
Some opponents of oil sands development downplay the industry’s significance, asserting it represents ‘only’ 2 per cent of Canada’s economy. The 2 per cent figure is based on Statistics Canada data. While Statistics Canada doesn’t publish specific figures for the oil sands industry, it does compile data for 'non-conventional oil extraction' and this appears to be the basis for that 2 per cent figure.
Using this figure to quantify the overall impact of oil sands development is misleading, however. For example, it does not include services purchased by industry for petroleum extraction or petroleum refining. Nor does this figure include goods and services purchased by oil sands developers from other industries, such as construction, manufacturing, finance, hospitality and environmental analysis - to name a few.
4. Economic contribution of oil sands can’t be easily dismissed.
While oil sands’ representation of Canada’s total economy may measure out to be in low single digits, the industry’s impact is not insignificant.
As part of the world’s eleventh largest economy by GDP, 2 per cent is equivalent to the entire GDP of Nova Scotia or all of the country’s electric power generation, transmission and distribution industry. It’s even more than is contributed by Canada’s transportation equipment manufacturing sector, which includes every firm involved in motor vehicle manufacturing, aerospace product and parts manufacturing, railroad rolling stock manufacturing, and ship and boat building. Canada, as the world’s ninth largest automobile producer, makes over two million vehicles a year.
5. Canada’s economy stands to benefit from oil sands for years to come.
Continuing capital investment will ensure that the Canadian economy will benefit from the oil sands for many decades to come. If oil sands production expands from 1.9 million barrels per day (mbd) in 2013 to 3.8 mbd in 2025, IHS CERA predicts the benefit (in terms of GDP and government revenue) could be nearly double of what it is today.
In its 2012 report on economic benefits of oil sands, the Conference Board of Canada estimated that over the next 25 years, our industry will create another 700,000 jobs, 30 per cent outside of Alberta.
The Walrus Talks Energy
The next Walrus Talks Energy event will be taking place on Wednesday, October 1 at 7 p.m. at the National Gallery of Canada in Ottawa, ON.