27,000 jobs and $15 billion: The impact of oil and gas (and Alberta) on Atlantic Canada’s economy

Bona Vista, Newfoundland fishing village. Getty Images photo

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Overview

Canada’s oil and natural gas sector has a positive impact on many aspects of the Canadian economy, not only in Alberta and Saskatchewan where the industry is a relatively large proportion of the economy, but across the country. When Canada’s oil and gas sector is healthy (or even in “slump” years such as 2016 when oil and gas prices were relatively depressed), the economies of all the provinces, including those of Ontario, Quebec, British Columbia, and in Atlantic Canada, also benefit.

The impact of the oil and gas sector on GDP, jobs, output and exports on provinces outside Western Canada and key economic sectors in those provinces is not well-known, but is highly relevant to current discussions about the role of oil and gas in Canada’s future.¹

In this CEC Fact Sheet, we examine the impact that the oil and gas sector has had on Atlantic Canada’s economy.

  • First, the analysis presented here includes not only the direct impact of Canada’s oil and gas sector on Atlantic Canada’s economy, in terms of nominal GDP, output, jobs and exports, but also the indirect impact that such activities have on other sectors in Atlantic Canada.
  • Second, given that the largest proportion of oil and gas activity in Canada occurs in Alberta, we also profile the impact of purchases from Alberta on various sectors in Atlantic Canada’s economy. Here, we look at 2016 in isolation (the latest year for which this data is available), as well as the period 2012-2016 in total. We also show how significant role Alberta plays in Atlantic Canada’s interprovincial and international trade flows.

Analysis One: The impact of the oil and gas sector on Atlantic Canada

Using customized data from Statistics Canada (see Table 1), in 2016 the oil and gas sector:

  • Was responsible for adding nearly $6.3 billion in nominal GDP to the economies of the provinces in Atlantic Canada;
  • Generated nearly $15 billion in outputs,² consisting primarily of the value of goods and services produced by sectors in Atlantic Canada;
  • Supported nearly 27,000 jobs directly and indirectly in Atlantic Canada; and
  • Paid over $1.6 billion in wages and salaries to workers in the four Atlantic provinces.

1. Atlantic Canada has a long history of involvement in the oil and natural gas sector, though in recent years the main involvement has been via Newfoundland & Labrador. For more on natural gas and oil development and revenues in the Atlantic provinces, see CEC Research Brief Five: Missed Maple Leaf Opportunities: A Synopsis of Natural Gas Industries in Central and Eastern Canada and Key US States.
2. For a discussion of Statistics Canada’s use of Input/Output models and also equilibrium models, see the addendum in Fact Sheet #17. The latest available year for the customized data from Statistics Canada is 2016.
Source: Derived from Statistics Canada, Supply and Use Tables, Custom Tabulation. Totals may not add exactly due to rounding.

The oil and gas impact alone in 2016: $ 7.5 billion on key sectors in Atlantic Canada

To examine the impact of oil and gas development on the Atlantic economy in more detail, consider that in 2016, the oil and gas sector purchased nearly $7.45 billion worth of goods and services from other industries in Atlantic Canada (see Table 2). That $7.45 billion included:

  • $500 million from the finance and insurance sector;
  • $600 million from the professional, scientific, and technical services sector; and
  • Over $5.4 billion from the manufacturing sector.
Source: Authors’ calculation derived from Supply and Use Tables, Statistics Canada catalogue 15-602-x_2016.

Analysis Two: Alberta’s share of Atlantic Canada’s interprovincial trade flows in 2016: $1.7 billion

Given that the largest proportion of oil and gas activity in Canada occurs in Alberta, we have expanded the analysis to include all purchases of Atlantic Canadian goods and services by Alberta’s consumers, businesses, and governments — that is, we measure the value of Alberta’s interprovincial trade with Atlantic Canada.

Albertans spent a substantial amount on Atlantic Canadian goods and services in 2016, from relatively small amounts ($56 million in accommodation and food services) to more substantial trade such as $534 million on manufactured goods. In total, in just 2016, interprovincial exports from Atlantic Canada to Alberta were worth $1.7 billion (see Table 3).

Source: Authors’ calculation derived from Supply and Use Tables, Statistics Canada catalogue 15-602-x_2016.

Alberta is one of Atlantic Canada’s largest markets for interprovincial trade and exports

Atlantic’s interprovincial trade with Alberta in 2016 (see Table 4) was behind only the region’s trade with the United States (nearly $19.3 billion), Ontario ($6.7 billion), Quebec ($6.3 billion) and ahead of international markets such as China ($1.1 billion), the United Kingdom ($900 million) and Japan ($400 million).

Source: Government of Canada, trade data online and authors’ calculation derived from Supply and Use Tables, Statistics Canada catalogue 15-602-X.

Alberta’s 2012-2016 totals: Nearly $10 billion

Between 2012 and 2016, Alberta imported close to $10 billion worth of goods and services from the Atlantic provinces. They ranged from the relatively smaller $20 million in electronics equipment to nearly $1 billion in food and non-alcoholic beverages purchases and $3.2 billion in manufacturing (see Table 5 and Addendum).

Source: Authors’ calculations derived from Supply and Use Tables, Statistics Canada (various years).

The takeaway

The oil and gas sector in Canada has a significant impact on Atlantic Canada’s export sectors directly and indirectly, as does the purchase of goods and services in Atlantic Canada by citizens, businesses and governments in Alberta, the province where the oil and gas sector is concentrated. The oil and gas sector also provides substantial economic benefits to the Atlantic provinces in terms of GDP, jobs, output, wages and salaries, including $6.3 billion in nominal GDP, $15 billion in outputs, 27,000 jobs and over $1.6 billion in wages and salaries.

Source: Authors’ calculation derived from Supply and Use Tables, Statistics Canada (Various Years)

Notes:

This CEC Fact Sheet was compiled by Ven Venkatachalam and Mark Milke at the Canadian Energy Centre (www.canadianenergycentre.ca). The authors and the Canadian Energy Centre would like to thank and acknowledge the assistance of Philip Cross in reviewing the data and research for this Fact Sheet. Image credits: “Petty Harbour, NL, Canada” by Gurpreet Singh from Unsplash.com

Sources: (Links live as of November 5, 2020)

American Petroleum Institute (July 2017). Impact of the Natural Gas and Oil Industry on the US Economy in 2015 <https://bit.ly/2EKrJTT>; Government of Canada, Trade Data Online(July 2020); <https://bit.ly/2EMswnj>; .Statistics Canada (2019). Supply and Use Tables, 2016, 15-602-X-2016. <https://bit.ly/3mJdGiB>; Statistics Canada (2019). Supply and Use Tables, Custom Tabulation.

Definitions:

The oil and gas sector is defined as the sum of oil and gas extraction and oil and gas investment. Oil and gas extraction is defined by NAICS subsector 211. It comprises establishments primarily engaged in operating oil and gas field properties. Such activities may include exploration for crude petroleum and natural gas; drilling, completing and equipping wells, and all other activities in the preparation of oil and gas up to the point of shipment from the producing property. This subsector includes the production of oil, the mining and extraction of oil from oil shale and oil sands, and the production of gas and hydrocarbon liquids, through gasification. Oil and gas investment include capital expenditures on construction, machinery and equipment and exploration by the oil and gas extraction industry. GDP, also referred to as gross value added at basic prices, is the sum of the market values, or prices, of all final goods and services produced in an economy. Output consists primarily of the value of goods and services produced by an industry. Jobs include employee jobs (full-time, part-time, and seasonal) and self-employed jobs. The direct impact of oil and gas extraction are the effects directly attributed to the industry’s production. The direct impact of the oil and gas investment is the deliveries by domestic industries to satisfy capital expenditures by the oil and gas extraction industry. The direct impact is measured in terms of GDP, output, and jobs within the oil and gas sector. The indirect impact covers upstream economic activities associated with supplying intermediate inputs (the current expenditures on goods and services used up in the production process) to the directly impacted industries. The indirect impact is measured in terms of GDP, output, and jobs through the supply chain of the oil and gas sector, including other key sectors of Atlantic Canada’s economy. We use the American Petroleum Institute definition of the oil and natural gas sector to quantify the and good & services purchased by the sector and the wages paid by the sector. The sector includes conventional oil and gas extraction and non-conventional oil extraction. Support activities for oil and gas extraction; oil and gas engineering construction, petroleum refineries, petroleum and coal product manufacturing (except petroleum refineries); petroleum product wholesaler-distributors; gasoline stations, crude oil and other pipeline transportation; pipeline transportation of natural gas. The manufacturing sector includes food and non-alcoholic beverages; alcoholic beverages and tobacco products; textile products, clothing, and products of leather and similar materials; wood products; wood pulp, paper and paper products and paper stock; printed products and services; refined petroleum products (except petrochemicals); chemical products; plastic and rubber products; non- metal mineral products; primary metal products; fabricated metal c products; industrial machinery; computers and electronic products; electrical equipment, appliances and components; transportation equipment; motor vehicle parts; furniture and related products; other manufactured products.

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