By Ven Venkatachalam
and Lennie Kaplan
Canadian Energy Centre
A headline screamed “The end of the Oil Age” in the Economist in 2003. Fast forward 18 years and that still doesn’t make sense in many ways. The demand for oil is increasing across the globe.
Even U.S. President Joe Biden is asking the Organization of Petroleum Exporting Countries (OPEC) to produce more oil.
You only have to fill your gas tank to see the rise in fuel prices in recent months.
And the growing global disconnect between supply and demand has meant the need for natural gas faces all sorts of shortages.
Who says oil is dead?
Many environmental groups have been calling for divestment from oil and gas. Yet they ignore reality. Divestment from oil and gas harms not only the many energy companies that create jobs in the economy but also investors such as the middle-class and seniors and other value-chain sectors that depend on oil and gas.
Let’s look at Ontario as a prime example.
The first commercial oil production in North America started in Ontario in 1858. Since then, the oil and gas sector has played a significant role in the provincial economy. Though Ontario is not a major producer of oil and gas, some 3,000 oil and gas wells are still active in the province.
There are many ways the oil and gas sector benefits the Ontario economy, in addition to providing a reliable energy supply. Thousand of kilometres of pipelines in Ontario move oil and gas to the U.S., creating many jobs in Ontario. The refining industry also creates employment and contributes to the provincial economy. And many sectors in Ontario supply goods and services to oil and gas companies.
According to the most recent (2017) comprehensive data available from Statistics Canada, the oil and natural gas industry added $7.7 billion in nominal gross domestic product to Ontario’s economy and over 71,000 jobs.
Many of these jobs are indirect but just as critical to the oil and gas sector. Think of oil and natural gas employment in Ontario as engineers and manufacturers hired to design and build oil and gas operating equipment and facilities, a building in Edmonton or downtown Toronto. Or think of an investment firm tasked with raising capital for a natural gas company operating in northern Alberta or B.C. Or an Alberta oil sands company whose local spending on office furniture results in jobs created in the Ontario firm that produces that furniture.
In 2017, the oil and gas industry purchased $7.3 billion in goods and services in Ontario, including $4.3 billion from the manufacturing sector alone. Other big-ticket purchases include $700 million from the Ontario finance and insurance sector, $600 million from the professional, scientific and technical services sector, and $300 million from transportation and warehousing. Overall, $2.1 billion in salaries and wages were generated as the result of oil and gas industry spending in Ontario.
Now let’s widen the look at Alberta’s impact on Ontario’s economy. In 2017, Alberta’s population was 11.6 per cent of the national total, while its purchases from Ontario’s manufacturing sector represented 21 per cent of Ontario’s total interprovincial trade in manufacturing. Alberta’s consumers, businesses and governments were responsible for nearly 24 per cent, or $32.5 billion, of Ontario’s total interprovincial trade in 2017, second only to Quebec.
Alberta’s $32.5 billion in purchases from Ontario in 2017 was behind the United States ($197 billion), but ahead of the United Kingdom ($14.7 billion), China ($3.4 billion), Mexico ($3.2 billion) and Germany ($1.9 billion), among others.
The goods and services purchased by Alberta consumers, businesses and governments from Ontario firms between 2012 and 2017 totalled about $193 billion.
Economies may be locally based, but investment and trade flows from other places impact local businesses and jobs.
Whenever someone says that oil and gas doesn’t matter to Ontario, tell them to look at the realities. From Bay Street to Yonge Street to Main Street, people across Ontario benefit from a thriving oil and gas sector.
Ven Venkatachalam and Lennie Kaplan work for the Canadian Energy Centre, an Alberta government corporation funded by carbon taxes. They are authors of $193 billion and 71,000 jobs: The Impact of Oil and Gas (and Alberta) on Ontario’s Economy. The unaltered reproduction of this content is free of charge with attribution to Canadian Energy Centre Ltd.
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