Oil and gas vitality is key to Canada’s economic success – by Gwyn Morgan (Globe and Mail – February 18, 2013)

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.

Bank of Canada Governor Mark Carney is very capable and impressive, but Britain has no lack of financial experts meeting that description. What differentiates him – and what drove the British government’s determination to recruit him as the next head of the Bank of England – is that he presided over the central bank of the economy that weathered the financial crisis better than other developed countries.

The most often cited reasons for Canada’s performance include sound home mortgage practices and prudent federal fiscal management. While those factors were crucial in the early days of the financial crisis, they don’t explain the country’s continuing strong performance even as our closest neighbour and dominant trading partner suffers through protracted economic doldrums.

So what is it that has made Canada and, by association Mr. Carney, such a star performer? The pivotal factor is that Canada is one of the world’s largest resource exporters.

Natural Resources Canada estimates that in 2010, the energy, mining and forestry sectors generated new capital investment of $95-billion and total exports of $200-billion. The degree to which natural resources underpin Canada’s economic prosperity is illustrated by balance of trade data showing an $84-billion net balance resource trade surplus, while manufacturing incurred a trade deficit of more than $60-billion.

The biggest contributor to Canada’s balance of trade is, by a wide margin, oil and gas. The industry is a major job creator, employing more than 550,000 people. It is also the largest investor in the economy, with $55-billion for new capital projects in 2012. Many of those dollars went to manufacturers and contractors from coast to coast. In 2011, the industry paid $21-billion into the coffers of the federal and provincial governments.

Now that Ontario has become a “have-not” province, the four oil- and gas-producing provinces (B.C., Alberta, Saskatchewan, and Newfoundland and Labrador) are the only contributors to equalization. What if those provinces were no longer able to pay into equalization? The Quebec deficit for the fiscal year ending March 31 is projected to be $2.3-billion.

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/oil-and-gas-vitality-is-key-to-canadas-economic-success/article8780664/

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