Conservatives re-calculate energy sector’s impact on the economy to make the case for natural resources.
September 5, 2012
by The Canadian Press
OTTAWA—The federal Conservatives have re-calculated the impact of energy and mining on the Canadian economy in order to help bolster their strong support of the natural-resource sector against environmentalists and others.
Officials have figured out how much income the sector brings to the economy—instead of just counting barrels of oil and tonnes of metal, Natural Resources Minister Joe Oliver said Tuesday in a speech to business leaders in Toronto.
In 2011, the figures show, energy, forestry, metals and minerals directly accounted for 15% of the country’s income.
But when indirect effects are taken into account, the minister said natural resources drive 20 per cent of the economy—and about 10% of all the jobs in Canada.
“It’s not all oilsands and it’s not all Alberta,” Oliver said in his prepared remarks. “It is forestry in British Columbia, potash and uranium in Saskatchewan, mining in Ontario’s Sudbury basin, hydro power in Quebec and all the related supply chains.”
Critics say that while no one doubts the economic dominance of energy and mining, the Conservative math only shows a slice of the story.
NDP natural resource critic Peter Julian said the figures don’t show how many jobs have been lost in softwood lumber and elsewhere because of the Ottawa focus on exporting raw materials instead of value-added products.
“We don’t argue that natural resources are an important part of the Canadian economy,” Julian said. “The issue is how the government is managing the resource economy.”
Plus, the new calculations are blind to the environmental cost of different types of energy production, added Keith Stewart of Greenpeace Canada.
Production and investment in wind, solar and other renewables are far less costly for the environment than oil and gas, he said.
“Not all resources are created equally.”
Normally, anyone interested in the heft of the natural-resource sector has had to rely on less-than-optimal data.
The real gross domestic product figures that come out every three months don’t capture the huge impact of global prices on the economy. And nominal GDP figures by industry, which include the price effect, have only been available for up to 2008—ancient history when it comes to calculating the impact of a major, evolving part of the economy.
Now, government officials have developed a way to update the nominal GDP numbers for the natural-resource sector so that they can see how much money is flowing into the economy from energy and mining on a more timely basis.
Oliver said the exercise shows that in both Alberta and Saskatchewan, energy and resources directly account for one third of nominal GDP. In Newfoundland and Labrador, it’s 40%.
However, officials did not immediately make a full province-by-province analysis available. So calculations for the two largest provinces—Ontario and Quebec—were absent.
By year, details provided by the department showed that the impact of natural resources has declined since the boom of 2008. Then, energy, mining and forestry were the source of 17.2% of Canada’s income, falling to 12.9% during the low-price days of 2009 before climbing to 15% in 2011.
Oliver said the calculations can be used to determine that natural resources support 800,000 direct jobs and another 800,000 indirect jobs in other sectors.
The impact will continue to grow, the minister added.
The department’s most recent calculations project $650 billion in investment in about 600 major resource projects over the next 10 years. That’s up from previous estimates of $500 billion.
“That $650-billion figure represents hundreds of thousands of high-quality, well-paying jobs for Canadian middle-class families in every sector of our economy, in every region of the country,” Oliver said.
The Harper government has been at pains to make that point since it overhauled the country’s environmental assessment process in its spring budget.
Federal ministers have argued repeatedly that streamlining environmental assessment is an efficiency exercise that will protect the environment but also make it easier for every region of the country to benefit from natural resources.
But their arguments have been drowned out by the outcry from environmentalists and other critics who say Ottawa is sacrificing the environment to the interests of the oilpatch.
Regardless, the new numbers from Natural Resources are well worth having, said Avery Shenfeld, chief economist at CIBC World Markets Inc.
“I think it’s important for Canadians to realize how big the resource sector has become,” he said in an interview.
He agreed that looking at nominal GDP by industry would give a more precise picture of the impact of natural resources, mainly because the global marketplace values commodities far more than traditional calculations of GDP would suggest.
“If you just focus on how many barrels of oil and tonnes of nickel and aluminum that Canada produces, you would understate the rising importance of those raw materials,” Shenfeld said. “Because what’s really been happening is that what we can exchange them for in trade with other countries has grown much more markedly than volume.”
The Bank of Canada has also developed a work-around so that it can better assess the impact of natural resources in the Canadian economy.
Its research shows that crude oil has been surging in importance since the late 1990s, compared with other natural resources, while forestry and agriculture have declined.
©The Canadian Press