Western energy vs. eastern industry: a manufactured debate – by Anne Golden and Glen Hodgson (Globe and Mail – May 25, 2012)

The Globe and Mail is Canada’s national newspaper with the second largest broadsheet circulation in the country. It has enormous influence on Canada’s political and business elite.

Anne Golden is President and Chief Executive Officer of The Conference Board of Canada. Glen Hodgson is Senior Vice-President and Chief Economist of The Conference Board of Canada.

In recent weeks there has been a recurring debate on whether the economic success being felt in much of Western Canada is hurting the rest of the country. The debate has centred on the oil sands and whether they have caused so-called “Dutch disease”, specifically in the manufacturing sector based largely in Central Canada.

The argument that good news for oil sands is bad news for the rest of the Canada is not supported by evidence.

Contrary to widespread opinion, the oil sands are not a significant share of the Canadian economy, and are not crowding out other sectors. Total energy and mining production as a share of Canadian GDP is actually smaller today that it was in recent decades – 4.6 per cent of GDP today, versus 5.1 per cent in 1990 and 5.9 per cent in 1980. Business services – which encompass everything from fast-food to investment banking – are by far the dominant sector in our economy, now representing 54 per cent of GDP.

A detailed analysis of the full benefits of the oil sand production would almost certainly reveal an energy value chain, and related economic benefits, that is focused within Alberta but stretches across the entire Canadian economy, adding to wealth in many other regions and sectors. Oil sands suppliers based in central and eastern Canada and workers from across the country share in the benefits of increased oil sands investment and production.

Although oil sands production of over 1.2 million barrels a day is on a rising trend, Canada’s conventional oil production in western Canada has declined over the past decade, so overall oil production has changed only marginally. But global demand and prices for most commodities, including oil, have clearly shifted upwards over the past decade. Commodity prices have risen largely due to the emergence of China and other high-growth markets like India and Brazil, which have added a strong thirst for resources.

For the rest of this article, please go to the Globe and Mail website: http://www.theglobeandmail.com/report-on-business/industry-news/energy-and-resources/western-energy-vs-eastern-industry-a-manufactured-debate/article2443331/

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