New research by the Canadian Energy Centre found that Canada’s oil and gas industry contributed $493 billion in revenues to governments across the country between 2000-2018, or an average of $26 billion per year.

Canadian economist Jack Mintz, president’s fellow at the University of Calgary’s School of Public Policy, shared his perspective on the value of oil and gas to Canada’s economy, current and future.

Highlights:

• The world could face oil shortages by the end of this decade because of reduced investment in new production
• Reduced oil and gas development in Canada would result in a lower Canadian dollar, which would make Canada less attractive for investment and employment
• People in Canada’s energy sector have the scientific knowledge to get to a low-carbon society without excessive economic costs

CEC: How would you describe the economic and financial contribution of Canada’s oil and gas provinces to the Canadian economy? 

Mintz: It’s significant. It’s the largest net export item we have as a country, plus, oil and gas produces the most output per working hour of all the sectors in Canada. With all the suppliers working for the industry, it helps generate a lot of income and a lot of taxes are paid for the Canadian government as well as the provinces, [particularly] Alberta, Saskatchewan, and Newfoundland and Labrador.

Its products are also used throughout the economy, because people still need to drive cars and they still need oil and gas products to pave highways, and they need oil and gas products for petrochemical plants so that we can have all sorts of plastics, which are in constant use by people all the time.

CEC: What do you think Canada would look like today without its oil and gas sector? 

Mintz: If we didn’t export oil and gas as we’re currently doing, we would have to depreciate the Canadian dollar, which some people think is great for manufacturing but it’s not, because if we have a lower dollar then people would look at Canada as less competitive for investment.

With a much lower Canadian dollar, we’d be poorer in the sense that Canadian salaries in foreign currencies (e.g. U.S. dollars) would be much lower. There could be a brain drain where we’ll lose people to other parts of the world if we’re not careful.

We would also have to be importing a lot of the oil-based product that we need, which would be potentially more expensive. It would also mean that Canada would have a smaller economy.

The exchange rate is very important in terms of measuring how rich we are as a country and the depreciating dollar is not a good thing from the point of view of our ability to buy goods and services from abroad. Once our dollar falls, we are basically impoverishing ourselves.

CEC: What role do you think oil and gas should play in Canada’s long-term future? 

Mintz: We forget that reserves deplete roughly six to seven per cent per year, so that means that of the hundred million barrels per day of supply we have today, the reserves next year will only support 93 million barrels per day unless you bring new reserves into supply.

At the same time, we’ve seen a very significant reduction in investment in the oil gas sector since 2014, and particularly during this COVID period. It’s well possible that we’re going to be facing oil and gas shortages by the end of this decade, mainly because of the lack of investment throughout the world and particularly in Canada, where oil and gas investment has even fallen more than we’ve seen elsewhere.

When you look at what’s being called for by governments in terms of moving to zero net emissions by 2050, there really isn’t a feasible plan yet. There’s ideas about how to get there, like the adoption of more nuclear energy [and] the use of more renewables. But in almost every plan that I’ve seen there’s still a very significant role of oil and gas, even if every light vehicle is electric, you still need oil and gas for transportation like shipping, aviation, long-haul trucking and railways because there isn’t a substitute at this point. You also need oil and gas for industrial processes, and plastics are going to be growing if anything.

There’s going to be a number of technologies needed to get a low carbon society. That’s why I think oil and gas has a future. Anyone who thinks that you can just eliminate the sector today and somehow we’re going to get all our energy needs — plastics, materials, chemicals and things like that, that we need just to operate — is not particularly realistic in terms of what can be achieved.

I think in the end we’re going to have to rely on [a variety of] different sources to some extent and hope to have the kind of innovations that would allow us to reduce carbon quite extensively, and in the cheapest way possible.

CEC: Is it important for Canada to have a healthy oil and gas sector?

Mintz: Most of the forecasters expect that oil and gas production will expand in Canada, less rapidly than the past, in the next 30 years. That’s because it’s still going to be needed internationally to be part of the overall supply.

Oil and gas helps keep our energy costs down and it’s very reliable source of energy. And at the same time, with new innovations which reduce greenhouse gas emissions, which is happening.  People in the energy sector have the scientific knowledge to get to a low-carbon society without excessive economic costs.