Energy and Canada’s GDP
By Ralph Torrie, President, Torrie Smith Associates
Contributor, Primer on Energy Systems in Canada, Second Edition
Canada ranks third in the world in terms of proven oil reserves, fourth in installed hydroelectric capacity, and fifth in overall energy production; it is a major player in the production and distribution of energy commodities. But exactly how much does Canada’s energy sector contribute to its GDP and employment? The answers may surprise you.
The production and delivery of oil products, natural gas and electricity in Canada contributes about $170 billion to Canada’s $1.8 trillion gross domestic product (GDP), or just under 10%. The largest contributions are conventional oil and gas production (4%), oil sands (2%) and the electric power industry (2%), as shown in the figure.
Figure 1: Canada's GDP, with Fuel and Electricity Industry Detail, 2012
The numbers in the figure are for 2012, but they haven’t changed much since then. In fact, even with low natural gas prices and the turmoil in the oil market in the last few years, GDP growth in the fossil fuel industry from 2012-2015 actually outpaced the rest of the economy, due largely to the U.S. dollar exchange rate boosting the Canadian dollar value of oil exports.
The fossil fuel industry is a larger share, as much as 25%, of the economies of the oil producing provinces, although there are significant refining, pipeline and distribution activities throughout the country. The 1.9% contribution of the electric power industry to Canada’s GDP is more evenly spread across the country, although there is still some provincial variation. The electric power sector generates one percent of Alberta’s GDP, where electricity use is restricted mainly to end uses where there is no practical alternative (lighting, appliances, small motors, telecommunications, and information technology). In contrast, in Quebec, where electricity is used extensively for space and water heat and provides about 40% of all energy end uses in the province, the industry generated 3.4% of provincial GDP.
While the fuel and electricity industry employs a large number of people by virtue of its size, especially in the oil and gas producing provinces, it is a capital intensive and technologically sophisticated industry and its share of employment is low compared to its share of GDP, especially for the upstream extraction and refining activities. Compared to its 9.7% share of GDP, the energy sector generates only 2.6% of direct employment in the Canadian economy, or about 391,000 jobs in 2012. For the fossil fuel-related industries, employment is heavily concentrated in the producing provinces (except for gas station employment, which is spread evenly throughout the country). Employment in the electric power industry is also spread evenly throughout the country.