The oilsands are a “uniquely Canadian success story” and an increasingly rare example of Canadian innovation, says a report that aims to contribute to a better understanding of the oil industry.
“A national project: How oil sands investment and production benefit Canada’s economy” concludes that both higher investment and higher production in the oilsands raise gross domestic product (GDP) by similar amounts, but the increase in investment leads to more jobs created than an increase in production.
Authored by Macdonald-Laurier Institute senior fellow Philip Cross, the report determines that spending on production is more stable than investment in downturns. Oilsands production is more resilient to industry downturns than conventional or shale operations, it adds.
Thus, investment in the oilsands tends to be more cyclical than production, which doesn’t necessarily decline when prices fall due to the high level of fixed costs, according to the report. With high fixed costs, little is saved by lowering output, and raising production lowers the average cost to produce.
The report analyzes that a $10 billion investment in the oilsands would raise Canada’s GDP by 0.5 percent. The corresponding increase in jobs would be 81,734 or 0.4 percent of all the jobs in Canada, whereas the increase in jobs from a $10 billion increase to production would lead to a gain of 38,237 jobs or 0.2 percent.
“For investment, 18.3 percent of the GDP generated accrues to other provinces—worth $1.920 billion in absolute terms. In the case of higher production, 13.5 percent of the increase in GDP, or $1.415 billion, accrues to the rest of Canada,” the report says.
