Canada’s Oil & Gas Production Cap to Cost Canadians 112,900 Jobs by 2040: MEI

Canada’s Oil & Gas Production Cap to Cost Canadians 112,900 Jobs by 2040: MEI

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what Canada's oil & gas production cap could mean for employment in the country by 2040 - hundreds of thousands of lost jobs

Canada’s oil and gas emissions/production cap is in the spotlight for all the wrong reasons. A media release by the Montreal Economic Institute (MEI) highlights that the policy could have significant adverse effects on employment in Canada, with countless jobs lost over the next several years.

While global demand for oil and gas continues to grow to record highs, the production cap would essentially relocate jobs out of Canada to other jurisdictions abroad – potentially to places like Saudi Arabia, Venezuela, and Iraq.

Why? Shouldn’t we want those jobs to stay in Canada?

“By targeting Canadian producers, the federal government has no effect on global oil demand,” says Krystle Wittevrongel, MEI’s Director of Research.

“Ultimately, every barrel of oil Ottawa keeps in the ground here will be replaced by a barrel of oil produced elsewhere in the world.”

According to MEI’s statement, capping oil and gas emissions – which would also cap production – could cause the loss or prevent the creation of 112,900 jobs across the country by 2040.

Can Canadians really afford to take on ill-conceived, potentially economy-draining policies like the proposed cap?

Other Reports Casting the Same Shadow

global oil demand to grow to 113 million barrels per day by 2035

MEI isn’t the only Canadian organization that has studied the proposed oil and gas production cap.

Deloitte, the Conference Board of Canada, and the Fraser Institute have also studied the policy, concluding that it could negatively affect Canadian jobs and the economy at a time when our country is experiencing significant economic challenges as is.

Deloitte:

Canada’s oil and gas production cap could:

  • Reduce Canadian oil production by 10%
  • Reduce Canadian natural gas production by 12%
  • Reduce jobs in the country by 90,000 between 2030 and 2040
  • Create a permanent economic downtown equivalent to $191 billion of lost activity in Alberta
  • Create a permanent economic downtown equivalent to $91 billion of lost activity in the rest of Canada

Conference Board of Canada:

Canada’s oil and gas production cap could:

  • Reduce employment in Canada anywhere from 82,000 to 151,000 jobs nationwide by 2030
  • Reduce Canada’s gross domestic product (GDP) by up to $1 trillion between 2030 and 2040
  • Reduce federal government revenue by up to $151 billion between 2030 and 2040

Fraser Institute:

Canada’s oil and gas production cap could:

  • Move global oil and gas production away from Canada to other jurisdictions abroad
  • Result in significant economic losses across the country
  • Harm Canada’s petrochemical and plastics sectors

Montreal Economic Institute (2022):

A much earlier study by the MEI also found that the oil and gas production cap would come at a high cost to Canadians. According to that November 2022 study, it could:

  • Reduce Canada’s GDP by anywhere between $44.8 billion and $79.3 billion annually
  • Reduce production to an equivalent volume of Canada’s total current annual exports
  • Reduce exports to Canada’s trading partners, who would have to find energy sources elsewhere – likely from less reliable, less transparent, and undemocratic countries

Canada the Only Country to Cap its Oil & Gas Sector

global natural gas demand expected to grow by nearly 25% through 2050

“Look around the world. No other major oil and gas producer is doing what we’re doing – the United States, Norway, Gulf states,” said Steven Guilbeault, Canada’s Minister of Environment and Climate Change, in a press conference announcing the cap.

“We are the only major oil and gas producers in the world to do this.”

Let’s step back momentarily and ask ourselves, “Why is that?”

No other country in the world has moved to cap its oil and gas production because maybe it’s a bad idea.

The reality is that the oil and gas sector makes an oversized contribution to the Canadian economy. It accounts for 900,000 direct, indirect, and induced jobs nationwide, 25% of Canada’s total merchandise exports (2023, by value), and is projected to generate $1.1 trillion in government revenues between 2000 and 2032, funds used to pay for our social programs such as healthcare and education that underpin our standard of living (which is falling).

Can Canadians afford to lose on the massive contributions oil and gas make to our country, only to see those jobs and economic benefits go elsewhere in the world?

Do We Really Want to Make Canadians Poorer?

Canada's natural resource exports pay for our imports - graph - past 12 months, Sept 2024

The Public Policy Form (PPF) conducted a study to determine what shutting down the oil and gas sector would cost Canadians. According to author Don Wright, doing so would have the following disastrous effects:

  • An estimated reduction in Alberta’s GDP between anywhere from 25.8% and 36%
  • An estimated reduction in Canada’s GDP between anywhere from 5.1% and 8%

Using a loss of 6% GDP nationwide as an example:

  • Canada’s 2019 GDP was $2.5 trillion; therefore, a loss of 6% would amount to $150 billion removed from the economy
  • There would likely be significant out-migration from Alberta as people move to other provinces, creating more competition for jobs and housing in other urban centres and resulting in lower real wages and higher housing costs in parts of Canada that think they have a minimal connection to the health of the oil and gas industry.
  • Alberta would likely move from a “have” province to a “have not” province, jeopardizing the tens of billions of dollars it pays to equalization every year.
  • Canada would likely see higher taxes and lower spending to account for the loss in government revenues.
  • The total value of goods and services produced in Canada will go down.
  • Canadians would consume less, earn less, and probably see their taxes go up. In other words, they would see a significant reduction in their standard of living—an unavoidable outcome.

Canadians Cannot Afford the Oil & Gas Production Cap

Natural resources make life more affordable for Canadians - banner snip

At a time when Canada is experiencing a productivity crisis, low levels of business investment, and a concerning drop in real GDP per person, it is abundantly clear that Canadians cannot afford to implement policies that could have adverse economic outcomes.

Supporting 900,000 jobs, a quarter of our exports (in 2023, by value), and generating tens of billions of dollars for our governments annually, Canada should be looking to implement supportive policies that would expand the oil and gas sector’s positive economic impact – not the opposite.

Join us today if you support a strong and prosperous natural resources sector and a brighter economic future for all Canadians.