Fraser Institute forecasts huge benefits from jobs and tax revenue growth.
March 14, 2013
by PLANT STAFF
Planned new investment in the oil sands and shale formations could make Canada the third largest global oil producer.
CALGARY — Canada would gain significant economic benefits including job growth and additional tax revenue as an energy superproducer, suggests a new study from the Fraser Institute.
The public policy think-tank said properly managed, the growth in energy production and exports would not damage other facets of the economy.
Canada as An Emerging Energy Superproducer found Canada currently ranks sixth in the world for oil production (behind Russia, Saudi Arabia, the US, China, and Iran), but with planned new investment in the oil sands and shale formations, it could become the fourth or even third largest global oil producer.
The story is similar for electricity exports, uranium production and natural gas, where Canada is currently the fourth largest global producer. Overall, Canada was the fifth largest exporter of oil, natural gas, oil products, and electricity combined in 2009, behind Russia, Saudi Arabia, Norway, and Iran.
Oil and natural gas extraction contributed $94 billion to GDP in 2011; electric utilities contributed $33 billion, while the uranium mining industry purchased goods and services valued at $1.1 billion. The study also estimates the energy sector is responsible for at least 663,000 jobs, or almost 4.5% of total payroll employment in 2012.
On the revenue side, Canada’s energy resource producers annually pay at least $19 billion to provincial and territorial governments in the form of royalties, lease payments and fees.
“These payments will only become greater as petroleum and uranium production increases and new hydroelectric facilities are built. Growth of oils ands bitumen production alone could result in royalties reaching $50 billion per year by 2033 compared to $4.5 billion in 2011,” said Kenneth Green, study co-author and senior director in the Fraser Institute’s Centre for Energy and Natural Resource Studies
The study recommends several policies to ensure the benefits of becoming an energy superproducer are shared broadly across Canada:
• Avoid the pitfall of increasing government spending as energy resource revenues increase since this can create financial difficulties when revenues fall.
• Hedge against fluctuating resource revenues by investing or saving non-renewable resource royalties above specified targets.
• Negotiate trade treaties and work to remove regulatory barriers to open new markets in foreign countries for Canadian energy commodities.
• Ensure Canadian oil, gas, and uranium royalties remain competitive.
Click here for a copy of the report.