The impact of the oil and gas sector on Alberta and B.C.’s economies

Canada’s oil and natural gas sector has had a positive impact on many parts 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.

The economies of all the provinces, especially Ontario, Quebec, British Columbia, and Atlantic Canada, benefit economically from Canada’s oil and gas sector, particularly when it is healthy, but even in “slump” years such as 2017 when oil and gas prices were relatively depressed.

The impact of the oil and gas sector on other provinces’ GDP, jobs, output, exports, and other key economic sectors is a bit more difficult to determine, but is no less relevant to current discussions about the performance of the oil and gas sector.

In this CEC Fact Sheet, we examine the impact that the oil and gas sector has had on British Columbia’s economy. Two points to note:

• First, the analysis presented here includes not only the direct impact of Canada’s oil and gas sector on BC’s economy in nominal GDP, output, jobs, and exports, but the indirect impact that such activities have on other sectors in the province.
• Second, given that the largest proportion of oil and gas activity in Canada occurs in Alberta, we also profile the impact of Alberta’s purchases on various sectors of BC’s economy. For this measurement, we look at 2017 in isolation (the latest year for which these data are available).
• We also show the significant role Alberta plays in BC’s interprovincial and international trade flows.

Analysis One: The impact of the oil and gas sector on British Columbia’s economy

Using customized data from Statistics Canada¹ (see Table 1), in 2017 the oil and gas sector:

• was responsible for adding nearly $9.5 billion in nominal GDP to the BC economy;
• generated nearly $18.0 billion in outputs, consisting primarily of the value of goods and services produced by various sectors in the BC economy;
• supported over 62,000 direct and indirect jobs in BC’s economy;
• paid over $3.1 billion in wages and salaries to workers in BC.

More than $5 billion impact from oil and gas on key BC industries

To examine the impact of the oil and gas sector on BC’s economy in more detail, consider that in 2017 the oil and gas sector purchased $5.6 billion worth of goods and services from other sectors in BC. The $5.6 billion in purchases of goods and services included

• $600 million from BC’s finance and insurance sector;
• $770 million from professional services; and
• over $2.8 billion from BC’s manufacturing sector.

Analysis Two: The value of Alberta’s purchases from BC

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

The impact of Alberta’s purchases on BC’s interprovincial trade in 2017: $15.4 billion

Albertans spent a substantial amount on British Columbia’s goods and services in 2017. The purchases include relatively small amounts ($20 million on utilities) to $700 million in finance and insurance services, to $1.1 billion in food and accommodation, $1.5 billion from mines and from oil and gas extraction, and nearly $3.4 billion from BC manufacturers. In total in 2017, interprovincial exports from BC to Alberta were worth $15.4 billion (see Addendum).

As a proportion of BC’s interprovincial exports from various industries, Alberta’s purchases accounted for nearly 36 per cent of its manufacturing sector, and over 61 per cent of its mining, oil, and natural gas sector.

Across all the interprovincial exports from all of BC’s sectors, Alberta-based consumers, businesses, and governments made an average of 37.8 per cent of purchases. That was significantly higher than Alberta’s 11.5 per cent proportion of Canada’s population.

Alberta is BC’s biggest market for interprovincial trade. In 2017, BC’s trade with Alberta was worth $15.4 billion, or 37.8 per cent of all of British Columbia’s interprovincial trade. Ontario came second at $14.1 billion (34.5 per cent) and Quebec third at $4.8 billion (11.9 per cent).

Alberta is British Columbia’s second largest export market after the United States

A look at BC’s international and interprovincial trade export data shows that at $15.4 billion in 2017, BC’s trade with Alberta was second behind only its trade with the United States (nearly $22.3 billion) and ahead of all other markets including Ontario ($14.1 billion), China ($6.9 billion), Japan ($4.5 billion), and South Korea ($2.9 billion).

Alberta’s 2012-2017 impact on British Columbia’s interprovincial exports: $95.8 billion

Residents and local businesses from other provinces benefit when they supply Alberta with labour, goods, services, and technology. Between 2012 and 2017, Alberta imported nearly $96 billion worth of goods and services from British Columbia. This total included $21.6 billion in manufacturing, $6.1 billion in accommodation and food services, and $5.9 billion in agriculture and forestry.

The takeaway

Canada’s oil and gas sector has a significant impact on BC’s export sectors, both direct and indirect, as does the purchase of goods and services by Alberta’s citizens, businesses, and governments in the province where the sector is concentrated. The oil and gas sector provides substantial economic benefits to BC in terms of GDP, jobs, output, and exports. In 2017 alone, the economic benefits included $9.5 billion in nominal GDP, $18.0 billion in outputs in the BC economy, 62,000 jobs, and over $3.1 billion in wages and salaries to workers in the province.

This CEC Fact Sheet was compiled by Ven Venkatachalam and Mark Milke, formerly of the Canadian Energy Centre (www.canadianenergycentre.ca). To see the article and all the associated tables, figures and charts, click here.