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Energy

Natural resources remain backbone of Canada’s trade and prosperity

Published

10 months ago

6 minute read

From the Fraser Institute

By Jock Finlayson and Elmira Aliakbari

It’s hard to overstate the importance of energy to our economy. In its latest “scorecard” report, the Coalition for a Better Future notes that “over the past decade, Canada recorded a cumulative trade gap of $130 billion. Had it not been for energy, our trade gap would have been about $1 trillion.” By any measure, the energy sector punches above its weight when paying Canada’s bills.

Canada is a mid-sized economy accounting for roughly 2 per cent of global production. Within North America, we represent less than one-tenth of the collective output of the three national economies. Canada is also an “open” economy that relies on cross-border flows of trade, investment and knowledge to sustain our high living standards.

To pay our way in an unforgiving and very competitive world, Canada must produce and sell exports to customers in other markets. Among other benefits, these exports furnish the financial means to pay for the vast array of imports that enhance the wellbeing of Canadian households and allow many of our businesses to operate efficiently and grow.

In 2022, Canada exported $779 billion of goods to other countries, and $161 billion of services, for a total of $940 billion. About three-quarters of Canada’s exports are destined for a single market—the United States. Canada also sources the bulk of imports from the U.S.

A hard truth about Canada’s trade is the outsized role of natural resource-based products in the export mix. Added together, energy, non-metallic minerals (and related products), metal ores, forest products and agri-food (i.e. food produced from agriculture) comprise roughly half of Canada’s international exports of goods and services—a notably larger share than in other countries with advanced economies (apart from Australia and New Zealand).

Energy alone accounted for 27 per cent of Canada’s merchandise exports in 2022, generating $212 billion for Canadian businesses, workers and governments. Mining contributed $85 billion in export revenues, followed by forest products ($60 billion) and agri-food ($57 billion).

Within the broad energy basket, oil and oil-based products dominate, accounting for more than three-quarters of all energy-based export revenues. Despite innumerable speeches and press releases issued by the federal government, energy’s contribution to Canada’s exports is poised to increase in the next few years—due not to growing exports of “clean tech” goods, carbon-free electricity or hydrogen, but to pending liquefied natural gas (LNG) production in British Columbia coupled with rising volumes of Western Canadian oil shipments following the completion of pipeline expansion projects.

It’s hard to overstate the importance of energy to our economy. In its latest “scorecard” report, the Coalition for a Better Future notes that “over the past decade, Canada recorded a cumulative trade gap of $130 billion. Had it not been for energy, our trade gap would have been about $1 trillion.” By any measure, the energy sector punches above its weight when paying Canada’s bills. The same is true, albeit to a lesser extent, for the other major resource sectors.

Many Canadians, huddled in increasingly unaffordable urban communities that have few evident connections to the country’s natural resource economy, may be puzzled by the continued vital importance of resource extraction and processing to Canada’s prosperity.

Ultimately, any trading country has a ledger showing the trade surpluses and trade deficits of its industry sectors. In Canada’s case, a handful of sectors generate significant trade surpluses, which help finance the large trade deficits incurred in other parts of the economy.

The story is a simple one—positive trade balances in the energy, mining, forestry and agri-food sectors offset chronic—and in some cases fast-growing—trade deficits in consumer goods, chemicals and plastics, motor vehicles/parts, and industrial and electronic goods. Canada also runs a smallish deficit in our overall services trade.

The sectoral trade data are informative. Among other things, they tell us where Canada has a “comparative advantage” in the global context. For a market economy, a pattern of positive trade balances is evidence that it has a comparative advantage in industries that reliably report trade surpluses.

Armed with such information, smart policymakers should create and sustain a business and investment climate that champions and bolsters the commercial success of industries that underpin the export economy. This is a message the Trudeau government has had trouble digesting, perhaps because it relies heavily on the votes of a few large metropolitan areas while most rural and resource-dependent regions remain a political afterthought.

Authors:

Jock Finlayson
Senior Fellow, Fraser Institute
Elmira Aliakbari
Director, Natural Resource Studies, Fraser Institute

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2025 Federal Election

MORE OF THE SAME: Mark Carney Admits He Will Not Repeal the Liberal’s Bill C-69 – The ‘No Pipelines’ Bill

Published on April 2, 2025

By

From EnergyNow.Ca

Mark Carney on Tuesday explicitly stated the Liberals will not repeal their controversial Bill C-69, legislation that prevents new pipelines being built.

Carney has been campaigning on boosting the economy and the “need to act forcefully” against President Donald Trump and his tariffs by harvesting Canada’s wealth of natural resources — until it all fell flat around him when he admitted he actually had no intention to build pipelines at all.

When a reporter asked Carney how he plans to maintain Bill C-69 while simultaneously building infrastructure in Canada, Carney replied, “we do not plan to repeal Bill C-69.”

“What we have said, formally at a First Ministers meeting, is that we will move for projects of national interest, to remove duplication in terms of environmental assessments and other approvals, and we will follow the principle of ‘one project, one approval,’ to move forward from that.”

“What’s essential is to work at this time of crisis, to come together as a nation, all levels of government, to focus on those projects that are going to make material differences to our country, to Canadian workers, to our future.”

“The federal government is looking to lead with that, by saying we will accept provincial environmental assessments, for example clean energy projects or conventional energy projects, there’s many others that could be there.”

“We will always ensure these projects move forward in partnership with First Nations.”

Tory leader Pierre Poilievre was quick to respond to Carney’s admission that he has no intention to build new pipelines. “This Liberal law blocked BILLIONS of dollars of investment in oil & gas projects, pipelines, LNG plants, mines, and so much more — all of which would create powerful paychecks for our people,” wrote Poilievre on X.

“A fourth Liberal term will block even more and keep us reliant on the US,” he wrote, urging people to vote Conservative.

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Alberta

Energy sector will fuel Alberta economy and Canada’s exports for many years to come

Published on April 2, 2025

By

From the Fraser Institute

By Jock Finlayson

By any measure, Alberta is an energy powerhouse—within Canada, but also on a global scale. In 2023, it produced 85 per cent of Canada’s oil and three-fifths of the country’s natural gas. Most of Canada’s oil reserves are in Alberta, along with a majority of natural gas reserves. Alberta is the beating heart of the Canadian energy economy. And energy, in turn, accounts for one-quarter of Canada’s international exports.

Consider some key facts about the province’s energy landscape, as noted in the Alberta Energy Regulator’s (AER) 2023 annual report. Oil and natural gas production continued to rise (on a volume basis) in 2023, on the heels of steady increases over the preceding half decade. However, the dollar value of Alberta’s oil and gas production fell in 2023, as the surging prices recorded in 2022 following Russia’s invasion of Ukraine retreated. Capital spending in the province’s energy sector reached $30 billion in 2023, making it the leading driver of private-sector investment. And completion of the Trans Mountain pipeline expansion project has opened new offshore export avenues for Canada’s oil industry and should boost Alberta’s energy production and exports going forward.

In a world striving to address climate change, Alberta’s hydrocarbon-heavy energy sector faces challenges. At some point, the world may start to consume less oil and, later, less natural gas (in absolute terms). But such “peak” consumption hasn’t arrived yet, nor does it appear imminent. While the demand for certain refined petroleum products is trending down in some advanced economies, particularly in Europe, we should take a broader global perspective when assessing energy demand and supply trends.

Looking at the worldwide picture, Goldman Sachs’ 2024 global energy forecast predicts that “oil usage will increase through 2034” thanks to strong demand in emerging markets and growing production of petrochemicals that depend on oil as the principal feedstock. Global demand for natural gas (including LNG) will also continue to increase, particularly since natural gas is the least carbon-intensive fossil fuel and more of it is being traded in the form of liquefied natural gas (LNG).

Against this backdrop, there are reasons to be optimistic about the prospects for Alberta’s energy sector, particularly if the federal government dials back some of the economically destructive energy and climate policies adopted by the last government. According to the AER’s “base case” forecast, overall energy output will expand over the next 10 years. Oilsands output is projected to grow modestly; natural gas production will also rise, in part due to greater demand for Alberta’s upstream gas from LNG operators in British Columbia.

The AER’s forecast also points to a positive trajectory for capital spending across the province’s energy sector. The agency sees annual investment rising from almost $30 billion to $40 billion by 2033. Most of this takes place in the oil and gas industry, but “emerging” energy resources and projects aimed at climate mitigation are expected to represent a bigger slice of energy-related capital spending going forward.

Like many other oil and gas producing jurisdictions, Alberta must navigate the bumpy journey to a lower-carbon future. But the world is set to remain dependent on fossil fuels for decades to come. This suggests the energy sector will continue to underpin not only the Alberta economy but also Canada’s export portfolio for the foreseeable future.

Jock Finlayson

Senior Fellow, Fraser Institute
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