What 1.5 Million Barrels per Day Could Mean for Canada’s Economy
Over the past decade, the Canadian economy has been driven largely by consumption and government spending, while business investment has remained relatively flat. To accelerate Canada’s economic growth, an objective emphasized by Prime Minister Mark Carney, Canada will need stronger business investment, particularly investments with the “one-two punch” of growing the economy through increased capital spending in the early years and greater exports in the longer term.
To explore the historical drivers of GDP and what expanded export capacity could mean for Canada’s economy, Mark Parsons, Vice President and Chief Economist at ATB Financial, joins Jackie and Peter on the podcast. The discussion ends with answering the question: What would an additional 1.5 million barrels per day of oil pipeline export capacity, including a West Coast pipeline to Asia and other expansion projects, mean for Canada’s gross domestic product (GDP) growth and jobs outlook over the next decade?
Studio.Energy and ATB have collaborated on a series of reports examining Canada’s GDP and the potential economic impact of increased oil export capacity. The series also includes background articles explaining how GDP is calculated and historical trends.
These articles are available on both the Studio.Energy and ATB websites (see links below).
Content referenced in this podcast:
- Peter Tertzakian’s op-ed in The Hub.ca: The next act in the oil crisis: Time to get ready for rationing and hoarding? (March 13, 2026)
- Seeking Shelter: Iran and the Next Structural Shift in Global Oil Markets (March 9, 2026)
- Studio.Energy reports on Canadian GDP and pipelines:
- ATB reports on Canadian GDP and pipelines:
- The GDP Payoff of Additional Oil Pipeline Capacity (March 18, 2026)
- See all GDP reports at: Special Reports | ATB Financial
- Background report on productivity and the importance of the oil and gas sector, “Productive diversification: Maintaining Alberta’s productivity edge” (August 2024)
Please review our disclaimer at: https://www.arcenergyinstitute.com/disclaimer/
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LinkedIn: @ARC Energy Research Institute
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Episode 318 transcript
Disclosure:
The information and opinions presented in this ARC Energy Ideas podcast are provided for informational purposes only and are subject to the disclaimer link in the show notes.
Announcer:
This is the ARC Energy Ideas podcast, with Peter Tertzakian and Jackie Forrest, exploring trends that influence the energy business.
Jackie Forrest:
Welcome to the ARC Energy Ideas Podcast. I’m Jackie Forrest.
Peter Tertzakian:
And I’m Peter Tertzakian, welcome back. Well, we have to do the obligatory timestamp, Jackie. It is 8:45 in the morning, Monday, March 16th. News travels so quickly or changes so quickly that we have to have that timestamp. As we speak, the price of oil, Brent North Sea oil is over $100, WTI is six bucks less or something like that-
Jackie Forrest:
Yeah, like $94?
Peter Tertzakian:
…$94. In my opinion, I don’t think it’s properly yet reflecting the severity of the situation. The Strait of Hormuz is still effectively blocked, but there’s more than that. Now, what we’re starting to see is that the supply chain’s being interrupted that we see refined products outputs like jet fuel, diesel, and even commodities that people put, in Asia, in their cookstoves, LPGs, things like that, liquid petroleum gases are starting to be constrained. We’re starting to see some rationing happening in certain countries. So this is a severe situation. And the thing is that these supply chains of tankers, say, to places like Japan, they are a month of transit. You actually have a month of tankers that are normally going to their destination, and the war is only two weeks old. So two weeks from now, we’re going to start to see a real break in the supply chain.
Jackie Forrest:
Right. We’re actually learning that other stuff was coming from the Middle East, like fertilizer, aluminum, sulfur. So it’s affecting other things and apparently even food into the Gulf region because many of those countries are not self-sufficient in terms of food. So I agree with you in terms of the $94. I just wanted to have a few quotes. The IEA put out their monthly oil market report, and the first sentence says, “The war in the Middle East is creating the largest supply disruption in the history of the global oil market,” which I agree with, but $94 certainly isn’t reflecting that. They also estimate 10 million barrels a day of crude oil and other liquids has been curtailed at this point.
And of course, the 20 million barrels a day that used to go through the Strait of Hormuz, they talk about there may be some ways to get some of that out, different ways, like through this pipeline the Saudis have to the Red Sea or Abu Dhabi has a pipeline, but those have risks too because, of course, the missiles and the drones can reach those. There’s the potential for other Iran proxy groups to get active, especially in the Red Sea, as they have in the past. So those options also have risks to them, too.
Peter Tertzakian:
Yeah. I think this is a serious situation that grows more serious by the day, and oil is not just used in light duty vehicles. So people who say, “Oh, we can just switch to electric,” I think trivializes a problem. Oil products are used from everything under your feet, the soles of your shoes, all the way to the top of your head in your hair care products, and more seriously in pharmaceuticals and medications and things like that. So this can’t go on much longer without really serious issues. Rationing, as we said, has been happening in some countries. Even Australia, this morning, put out some sort of news release saying within the country and the rural areas, there’s shortages starting to emerge and trying to assure the public. The issues are really manifesting themselves more seriously in Asia, which are more dependent from oils and products that come out of the Strait of Hormuz and the Persian Gulf.
Jackie Forrest:
Well, and the rationing, I want to talk about your paper. You had a op-ed in the hub and also on your website, we’ll put links to both of those, titled The Next Act in an Oil Crisis: Time to Get Ready for Rationing and Hoarding. You had a really cool picture of coupons or something for gasoline-
Peter Tertzakian:
Yeah. I was in Ottawa and I was privileged to be able to see a very rare, the only issuance in Canada, you can’t buy this, of gas rationing stamps that the Canadian government had made proofs of, print proofs. It’s in a filing cabinet and they brought it out and showed me, because they know that I like to collect these sorts of things and have interest in vintage energy artifacts. They were never actually printed and distributed in 1979, 1980, which was the time of the Iranian Revolution and the Iran-Iraq War, which is almost like a rewrite of a play today or what’s going on. So it just said to me, “We’ve been here before. We’ve seen this movie before and it’s playing out again.”
Jackie Forrest:
Yeah. Well, the good news is because now North America is a net exporter of crude oil. I’m not sure we’re going to actually have to ration because we’ll have enough oil, not like some of those other countries that rely on those imports, but certainly price is going to be a factor in terms of-
Peter Tertzakian:
It’s going to be a factor.
Jackie Forrest:
Yeah.
Peter Tertzakian:
Yeah. I agree we’re in better shape than most other regions of the world, but don’t take it for granted because the supply chains that come out of the Persian Gulf, it’s not just oil, as you mentioned, it’s all sorts of other things.
Jackie Forrest:
That’s right. I did also want to mention Studio Energy also published a paper, Iran and the Structural Shift in the Global Oil Markets authored by Jared Dziuba. We will put a link to that one as well.
Peter Tertzakian:
Okay, great. Thank you, Jackie. I hate to be such a Debbie Downer on a Monday morning, but this obviously has ramifications to the world economy and economies. And I think we can agree that many economies around the world were already weak going into this, including the Canadian economy. If you looked at some of the GDP numbers and news from last week, Canada lost 84,000 jobs, unemployment ticked up to 6.7%. Although the projection for our GDP for 2026, I think, is like 1.6 or 1.5%. The numbers that came out in the last quarter were not encouraging. I think we were like 0.6% year on year or quarter on quarter. Who better to talk about GDP than our special guest? We’re delighted to welcome Mark Parsons, VP and Chief Economist at ATB. Welcome, Mark.
Mark Parsons:
Thank you, Peter and Jackie, for having me.
Jackie Forrest:
All right. Well, we’re going to get into some details here, but spoiler alert, the whole point of this podcast is to talk about the GDP impact of building oil pipelines like the one in the MOU that talks about a million barrel a day pipeline to the West Coast. What does that do to the growth of our economy? The Canadian economy is weak, but Mark Carney talks about we’re going to build very quickly and become the fastest growing economy in the G7. By the way, I did want to have a little bit of a correction to an error I made on the podcast. I said that we were last in the G7 in terms of our outlook for GDP growth, but I did check the IMF and because many of the G7 countries are almost worse shaped than us like Italy, Japan, Germany.
We’re actually not dead last, but we do need to get in front of the Americans. The IMF thinks we’re going to grow at 1.6% in 2026, they think the Americans are going to grow at 2.4%, and many of the other G7 countries are actually slower than us. I don’t know if that 1.6% is likely based on some of the data we’re seeing with this February jobs report, but-
Mark Parsons:
Yeah. We’re sitting closer to 1.4, 1.5, but that’s in the neighborhood of what we’re expecting. But I think the longer term story there, Jackie, is that Canadian economy has struggled over the last few years, especially on a per capita basis, which I think we’ll talk about in this podcast, is that the economy’s been growing just not fast enough to really make much of a move on GDP per capita, which I think is one of the bigger issues-
Peter Tertzakian:
So that’s total GDP divided by the population to get GDP per person. But actually already we’re talking jargon, and that’s one of the things I do not like to do because GDP is a term that’s thrown around in dinner conversations or otherwise without really knowing what GDP completely means. It’s a measure of economic health, sort of like saying, “Hey, my blood pressure is X.” But why don’t we just start, Mark… Actually, let’s just back up. Tell us a little bit about yourself first of all, how you got to be the chief economist. And then I want to segue into… tell us what GDP means.
Mark Parsons:
Oh, absolutely. Mark Parsons, chief economist at ATB Financial. I started my career in Ottawa. I worked at the Federal Department of Finance, been involved in senior policymaking capacity, economic forecasting for my whole career, and then I moved into consulting. So I worked at PricewaterhouseCoopers for a while. I worked with private and public sector clients. Then I worked with the province in the treasury board and finance, budgeting, forecasting, tax policy, all that fun stuff. I’ve been chief economist at ATB for almost three years now. One of the perks of my job is I get to visit with a lot of business leaders and sort of on-the-ground insight, which I translate into forecasts. So I combine kind of the macro view with the micro view, talking to business leaders, and I think that really helps me kind of get on-the-ground insights.
Peter Tertzakian:
Okay. GDP, what is GDP?
Mark Parsons:
Yeah. It’s the value of what we produce in any given year. So if say GDP went up 2%, that means the volume of what we produce has gone up 2%. So it’s a measure of production. It’s not wealth, it’s not a stock measure, it’s a flow measure. It basically tells you if you’re expanding or contracting. If economic activity is going up, your GDP is going up.
Peter Tertzakian:
Yeah. Actually in my intro, I think, I was mistaken. I said GDP was up 0.6%. That was in Q3, 2025. Q4 was actually a decline, which doesn’t really bode well going into this current crisis.
Mark Parsons:
Yeah. GDP stats for 2025 are really interesting because there’s tariff whiplash. They had all this front loading of exports and inventory bills in the first quarter, and then that kind of reversed itself. We had a contraction in Q2 and then came back three in Q3, and then came down in Q4. It averages out to 1.7 for the year, but not a particularly good year for the Canadian economy. Although, I have to say, it was better than many were expecting. A lot of people, including myself, thought the Canadian economy didn’t grow that much when the tariff war started, and one of the big reasons for that is because of CUSMA exemption. So the tariff burden ended up being a lot smaller than I think we first feared.
Peter Tertzakian:
Right. So when Trump came in a year ago, he was talking about slopping 25% tariffs on everything in Canada. And then by summertime, the narratives retreated into just falling under CUSMA, Canada-US-Mexico trade agreement, free trade agreement.
Mark Parsons:
That’s right. So that really cushioned much of the blow.
Peter Tertzakian:
Right, but that is yet to be resolved. We don’t know what’s coming up.
Mark Parsons:
That hasn’t been resolved. We have to review this year. I think what you’re seeing in the data is a lot of uncertainty is holding things back. But the tariffs themselves, less punishing than we first feared. It doesn’t really change the fact that, which I think we’ll talk about is that, some of the fundamentals underlying our GDP stats are, I would argue, pretty weak.
Jackie Forrest:
Well, before we get to that, why is GDP such an important metric? Mark Carney talks about GDP being important, wanting to be the fastest growing economy. Considering the world we live in today, why is growing our economy more important than maybe it was in the past?
Mark Parsons:
Yeah. The standard argument economists make is that you got to grow GDP per person because that’s ultimately going to drive living standards and wages, and things like that. That just makes us a wealthier country. So that’s important. But one of the things that I’ve been working on with Peter in our series is that it’s also really important to gain leverage in today’s geopolitical environment where we’re being threatened, and strength is power. So a stronger economy means you have more leverage on the international stage or bargaining chips.
The other thing is, what can you do within your control? There’s a lot, I think, we’ve realized over the last year or so. It’s not just Trump tariffs, but Venezuela and Greenland and Iran now. Well, a lot of this is just going to happen, and I think a lot of attention now is, “Okay. Within Canada’s control, what can we do better?” So I just feel like there’s been this giant wake up call in Canada to look under the hood and say, “Wow, I didn’t realize we sent so many of our exports to the US. I didn’t realize our business investment was so weak or that housing was powering the Canadian economy for so long. What can we do about that?”
Peter Tertzakian:
Yeah. What can we do better, but also what can we do to shield ourselves in an era of economic warfare? Jackie, you and I have talked about that a lot on the podcast, particularly in the last six months. But I view things like a tariff, sanctions, even these macro forces of potential inflation as a consequence of what’s going on and around. These are like economic grenades that get lobbed at Canada. And if it’s weak, our flow of money as a GDP is weak, then we’re very vulnerable.
Mark Parsons:
We are vulnerable to shocks.
Peter Tertzakian:
Yeah.
Jackie Forrest:
Well, to help understand this, I know that Studio Energy and ATB have come together to work on a series of papers, and we will put a link to that, and that is what we’re going to be discussing today. But one of your first papers was what is GDP and Canada’s GDP dilemma? So we’ll link that as the first one, but how do we measure GDP and why did you think it was important to sort of get the paper out that clarifies that?
Mark Parsons:
We definitely don’t want to spend too much time on dissecting what GDP isn’t, but I think it’s important to have that foundation. The best way to think of it is GDP can be decomposed into various components like consumer spending, investment, exports, government spending. And that’s the approach Peter and I took and said, “Okay. Let’s look under the GDP hood so to speak and say, “What’s actually driving Canadian GDP over the last couple decades?”
Peter Tertzakian:
Yeah, or what isn’t driving it.
Mark Parsons:
Or what isn’t driving it. I have to say, in my job, I talked to so many people about this topic and I’ve kind of learned what resonate and what doesn’t. So when I start talking about productivity and GDP per capita, it’s like, “Eh, that’s not as important to me as the price of groceries or my kind of everyday experience.” And what I say is it’s a bit of a slow burn, right? You might not feel it today, but over a long period of time, if we have really weak productivity or GDP per capita, you’re going to feel that. You’re going to just feel poor, and you’re not going to have as much money to spend.
Peter Tertzakian:
Yeah. It’s a little bit like the engine under the hood. If you don’t maintain the engine, then eventually it’s going to catch up with you and your car isn’t going to go as fast.
Mark Parsons:
That’s right.
Peter Tertzakian:
Or actually break down in the worst case.
Mark Parsons:
Exactly. I don’t know if you want to get under the hood right now, but… Yeah.
Peter Tertzakian:
I think we should because of this dissection of GDP, and there’s many ways to measure GDP. But at the top line, there’s something called the macro identity. I don’t want to get too formulaic, but I think it’s important to reiterate, Mark, what you said about the components. GDP is actually a simple addition of consumer spending, which is really a flow of how much the Canadian populace spends money, on everything from groceries to housing plus investment. So this is the investment in infrastructure and pipelines, which we’re going to talk about after we understand the fundamental issues here. So investment and then it’s government spending. The government is a big employer. The government is a big spender. The government also spends money on programs and, indeed, even invests in the economy. And then there’s the net of exports minus imports. And exports are particularly important for a resource economy such as Canada because oil, gas, minerals, agriculture, forestry, you name it, is a big part of adding to the GDP of the country.
Mark Parsons:
Yeah, exactly. And then you have to net out imports, as you said, because that’s something that another country has produced that we’re just taking in ourselves. So we can’t really count that towards our GDP.
Peter Tertzakian:
Right.
Mark Parsons:
Yeah. So if we’re spending a lot of money but importing everything, that’s not going to add to our GDP.
Jackie Forrest:
Well, you talked about it takes time to see this and we actually are seeing the impacts. There’s a chart in the paper that looks at the GDP per person or per capita, and it shows the Americans sort of just going up very steady and Canada really flat lining. I’d say really, even back in 2015 or so, there hasn’t been a lot of growth. So we’re falling behind the Americans, we’re getting closer to the average for all OECD countries where we used to be quite a bit ahead of that. So it is showing up.
Mark Parsons:
It is. It’s showing up in the data and, like I said, it hasn’t happened overnight. It’s been happening for, like you said, over a decade. And what’s really happened here is that the population, as we all know, in Canada has grown a lot. So what we have to do in Canada is increase our output at the pace, at least, that we’re adding people, but more. Right? Otherwise, you’re not going to get that improvement in living standards. I do want to say some people kind of dismiss GDP per capita because it’s like, “Well, there’s other measures that are important, like income and equality and there’s indexes of economic wellbeing.” I do want to acknowledge that, that there are other metrics, but that doesn’t mean we should dismiss GDP per capita either. It’s a really important measure. So I sometimes find that we like to sometimes excuse our bad… “Hey, don’t look over here. We’re better in other areas,” but this is actually a pretty serious problem.
Peter Tertzakian:
Especially, if you look under the hood.
Mark Parsons:
Especially, yeah.
Peter Tertzakian:
GDP per capita is almost, as I said, like blood pressure or your heartbeat or something like that, measuring it. It’s just you really have to look underneath and do some more diagnostics to see what the issue is. So let’s go to the first term in that GDP identity, which is household spending per capita. That chart is also in our joint paper here and let’s just sort of take the pandemic out of it, but what’s striking is that it’s just completely leveled out. This is what you’re saying is that as more people come in, it reduces GDP per head. We are not growing the GDP faster than we’re bringing people in. So we bring a lot of people in and we know that household spending includes buying houses and condos, but houses and condos don’t create productive capacity. Once you buy a house, it’s it. It’s not generating widgets and things that drive the economy.
Mark Parsons:
Yeah, exactly. We know that, over the last two decades, household spending has been a big driver of GDP. And the question I would have is, can we count on that going forward? Because we already have really high debt ratios in Canada, households. The Bank of Canada has lowered interest rates to 2.25%, but we don’t think they’re going to lower them anytime soon. In fact, we are now talking potential hikes with the war in Iran and the pressure that’s putting on inflation, and we know population growth is slowing. So can the Canadian consumer drive the next leg of growth in Canada? I’m of the view that we can’t, and so we’re going to have to find growth from other sources.
Peter Tertzakian:
Well, you can’t if you don’t have a job. And this is the thing is that the job numbers were not encouraging as of last week. What was the number that I quoted here?
Jackie Forrest:
The February data was a loss of 86,000 jobs. And I think it was expected actually we would gain a little bit. So it was very different than what the expectation was for the jobs.
Mark Parsons:
Exactly. And that all links, which we’ll get to, is to investment. You have to increase productive capacity that creates a lot of jobs and it’s more sustainable going forward.
Peter Tertzakian:
Okay. So consumption is largely being targeted. If you really look under the hood, housing and condos has been a big driver.
Mark Parsons:
Yes. Well, the residential investment is another category of GDP, and that’s over a very long period of time that has been an important driver in Canadian economy. The other thing is you see a bit of a dip in here, and that was the interest rate shock and high inclusion-
Peter Tertzakian:
In the early ’20s, yeah.
Mark Parsons:
Yeah. Coming out of COVID, we started spending money and then we’re hit with inflation, and the banks can’t raise interest rates, that caused consumers to pull back. And then you’re starting to see people spend money again. But you have to ask yourself, how sustainable is that without it being underpinned by strengthening the economy, the investment in the jobs?
Jackie Forrest:
Well, especially because the trend right now is GDP per person is going down, right? So their ability to spend per person is not growing. Let’s talk about government spending because that’s another thing that also drives GDP. You have a chart in the paper that shows really since 2020 especially, but even back to 2015, a steady growth in real government spending. How has that impacted GDP?
Mark Parsons:
Yeah. We knew that during COVID that the government’s going to spend money for supports to households and things like that. And I think most people said, “Yeah, that’s reasonable. This is a crisis. The government should respond a countercyclical way.” The concerning trend for me is that government spending has stayed elevated, has continued to rise post-COVID. So as the economy recover, you think the government spending would start to taper off, and that’s not what we’ve seen. Now you could say, “Well, we were hit by high inflation, population growth, and so there are new spending pressures that emerged.” But to me, that is a concerning trend in the data to see how much of our GDP growth over the last decade has been driven by government spending.
The Carney government has said, “Well, look, we want to get operating spending under control and really focus on capital investment.” So kind of shifting the mix, but there’s still risks there. Even if it’s capital investment, you have to make sure that if it’s a grant or a tax credit, that leverages private sector investment. We need private capital. So there’s a risk that the government investments in capital don’t translate to corresponding increases in private spending.
Peter Tertzakian:
Yeah. I always like to say that the government spending on investing in the private sector is like seed capital, that it has to be followed in much greater volume by the private capital from investors within and foreign investment coming in. That takes time, and also it’s not guaranteed.
Mark Parsons:
That’s right. The government would say, “Look, we have a tax credit for investment.” We’ll count that as investment, but it’s not guaranteed that that’s driving incremental investment. It could be subsidizing something that would’ve happened anyway.
Jackie Forrest:
Well, let’s talk about the next one, which is the I in the formula, the investment. How has that been trending and what are your expectations going forward?
Mark Parsons:
This is what I feel like we really put a spotlight on in the paper and it’s not getting as much attention as it deserves because people are saying, “Well, we have a GDP per capita problem.” But when you diagnose it properly, it’s really an investment problem because we just talked about how consumption has been going up per person over the last two decades. Government spending definitely has. So what’s holding GDP per capita back? It’s really this chart that I think Canadians should be concerned about is that business investment, which would include structures, machinery equipment, and even intellectual property is well below what it was in 2014. And it’s also below what it is in levels. I know this is a per capita chart, but if you look at it in levels, it hasn’t grown in last-
Peter Tertzakian:
In absolute dollars.
Mark Parsons:
… In absolute dollars, it hasn’t grown in the last decade.
Peter Tertzakian:
Yeah. This is a problem because it’s investment that catalyzes economic activity. It takes years and that creates taxes and in the resource business royalties, which then allows government spending to occur, especially without deficits, and also provides the jobs for people to do consumer spending. But if we see investment lagging much as it is on this chart, and I put a big stroke on the chart with my pen, I don’t know if you heard that on the microphone, and it’s flat, then that’s a problem because it starts to manifest itself years after the slowdown starts. And now, I believe that’s what we’re seeing.
Mark Parsons:
Exactly. Some people will say, “Well, this makes sense because we had the big decline in oil prices and the drop in oil and gas investment in 2015, ’16,” which we all know about, but the weakness is pervasive across industries, including the manufacturing sector as well. You can’t just say, “Well, this is an oil and gas story.”
Jackie Forrest:
One thing I learned from your paper, and I do encourage everyone to look at this link and look at the paper itself, because these charts make more sense when you see them, but it is a one-two punch because the investment drives GDP when they build the plant or build the pipeline or build the power plant, but it also helps us create exports long into the future. So it has this kind of long tail to it where you get the upfront capital spending and jobs associated with construction, but then the other big part of the GDP formula is exports add to GDP as well. So if it is a project that results in us exporting things, then it creates a long, long benefit to GDP.
Mark Parsons:
Yeah. Jackie, I’m glad you brought that up because that’s one of the central points that I’m trying to make is the reason I say it’s really an investment problem, not a GDP per capita problem is because when we talk about exports, you’ll see it’s a similar chart. Exports per person haven’t really gone up in the last two decades, but how do you get the exports without the investment? You need the productive capacity to get those exports. So to me, it circles back to, “You need to sync that capital, and then you’ll get the payoff in the future.” In the oil and gas sector, we know that sometimes it takes years to build that upfront capital. So you get the GDP boost in those years, kind of the investment boom that we’ve had in Alberta when we’re building the oil sands. But now oil and gas is not adding so much to growth via investment, but via exports. So you’re getting the payoff, still adding to GDP-
Peter Tertzakian:
Selling the products.
Mark Parsons:
You’re still getting the boost to GDP, but it’s coming through the export channel, not the investment channel as much. But at some point that runs out because if you’re not investing, you’re not going to get those future exports.
Jackie Forrest:
Yeah. Well, let’s move on to building pipelines and infrastructure. We want to specifically talk about oil pipelines today, but maybe we can just talk about the importance of these projects. When you look at all the projects that have been put forward for the Major Projects Office, why are the oil and gas pipelines, including those LNG terminals, important in terms of this whole GDP? Getting to this, what do you talk about, a trillion dollars of spending?
Mark Parsons:
Yeah. It’s interesting because you talk about the prime minister’s goals of being the fastest-growing G7 country and getting all these investments and even doubling non-US exports. I actually think we’ve identified the right problem because our paper really shows its investments in exports. You say, “Well, the goals make sense given the problem,” and I do want to acknowledge that because I don’t know if we were there before. I actually don’t think we had properly diagnosed the problem or acknowledged it and we’re trying to move in the right direction.
So we can debate whether we’re going to be able to accelerate these major projects and when we’re going to get shovels in the ground, but I think directionally, we’re in a much better position. I think the Carney government realizes that 25% of Canadian exports are energy products, still a major driver of investment, even though it’s lower than it used to be. So what is the low-hanging fruit? If you need growth now, how are you going to get it? I think this is the challenge that’s confronting the federal government right now. Because if you look at 2025, this is the year investment was really supposed to pick up and it was flat, right? So when’s it going to happen? When is all this talk, all these agreements, like the MOUs and everything, actually going to be translated into action? That’s what I’m looking for.
Everyone calls everything a crisis, whatever. But look, the Bank of Canada, Carolyn Rogers in 2024, senior deputy government of the Bank of Canada said, “We have a productivity crisis.” That was before Trump 2.0, and nothing has really changed. So if we’re not going to build out port infrastructure pipelines to really increase our largest export, then where’s the growth going to come from? I think that’s the conversation we need to have because I feel like, “Well, maybe we should be doing this or that.” Okay, what is the other thing we should be doing then?
Jackie Forrest:
Well, the other interesting thing is if you look at the list of the Major Projects Office, the size of these LNG terminals that are on there are like $30 billion each. I don’t know what this West Coast oil pipeline will cost, but I’m sure it would be in the range of, I’m sure you have opinion-
Peter Tertzakian:
$35 billion.
Jackie Forrest:
35 billion? The small nuclear plants in Ontario are 21 billion. But other than that, almost everything on the list is like 5 billion or less. So that CapEx piece for most of those projects is not even comparable to these. And then on top of that, you get this export adder that comes for years and years after. Right?
Peter Tertzakian:
Well, and on top of that, there’s the capital expenditures to fill the pipeline-
Jackie Forrest:
Oh, that’s right.
Peter Tertzakian:
… which are two and a half times the amount to build the pipeline. So it’s 35 billion plus these other pipelines that we’ve researched that we’re going to talk about. But if we add another one and a half million barrels per day of oil pipeline, the estimates are that over the course of 10 years, staged out, it would cost $41 billion to just build the pipeline and that would give you a GDP kick, but that’s not where the real kicker is. The kicker is that you have to spend another $100+ billion to fill it, but then the returns from that investment, or I as it is in that macro formula, is that all of a sudden you start getting the exports which are high value, which then create royalties in taxes, which create more government intake, which creates more government spending and it’s sustained for a long period of time. That’s why resource economies are really desirable, especially right now in the current world situation.
Jackie Forrest:
Well, especially because people in Asia would love to have products from Canada and not be dependent on choke points like the Strait of Hormuz. So now, is our window of opportunity, but it’s that one-two punch thing. Actually, the great point is actually a one-two-three punch. You build the pipeline, you get the upstream CapEx investment, and then you get the ongoing operating expense associated with those upstream investments plus the exports that come from it. So when you look at that major project list, I would say that there’s not going to be anything that comes close to the economic impact of those projects.
Mark Parsons:
Well, not to add a fourth punch, but if you wanted to, you’re diversifying your export markets and you’re getting a better price.
Jackie Forrest:
That’s right. We’ve already seen that with Trans Mountain and then LNG Canada, hopefully soon we’ll start helping our ACO price.
Mark Parsons:
Yeah, and that gets into having more leverage politically. I think one of our contributions here, Peter, is that I think the emphasis is on how many jobs is a pipeline going to create. Well, I actually think it’s more of the upstream impacts-
Peter Tertzakian:
For sure.
Mark Parsons:
… and then the related supply chain linkages. Just travel around Alberta, drive from Nisku to Leduc, and you can see that we have the supply chains in place now to start scaling, right?
Peter Tertzakian:
Yeah.
Mark Parsons:
So we’re not building new industries.
Peter Tertzakian:
No.
Mark Parsons:
Yeah. So you build the pipeline, then you have to fill it, you need the CapEx to fill it. But then even after you have the growth capital, you need the sustaining capital. Right now, oil sands is not really… You know it’s not the growth stage, but we’ve built up because we built the oil sands, takes billions of dollars just to maintain or and grow that production.
Jackie Forrest:
So every year, there’s ongoing sustaining capital-
Mark Parsons:
There’s ongoing sustaining capital-
Jackie Forrest:
… outset declines and keep those production rates allocated.
Mark Parsons:
Yeah. So there’s a level shift up in that sustaining capital that lasts essentially forever.
Peter Tertzakian:
And then the export value of what you sell and then on top of that, the royalties and taxes that accrue back to government. We can’t forget about that. So this is the thing that’s so important about dissecting and understanding the GDP formula is a lot of the analysis that I’ve seen about GDP contribution of pipelines just talks about or analyzes a GDP contribution of building the pipeline, which admittedly is a construction surge for a few years. But that’s not where the real kicker is in building a pipeline or for that matter, for other commodities, a railroad or a porch. The kicker comes when you start producing the goods and the resources to fill the supply chain, the jobs that are ongoing with that, and then the taxes and the royalties that accrue from that and the export value.
Mark Parsons:
Yeah. Just to circle this all back to the problem we started with, which was GDP per capita, one of the things we found in analysis is because these are such capital-intensive industries that you get that boost in exports in GDP that’s sort of greater than the corresponding increase in the population. So what actually drives GDP per capita. It’s a very productive industry, right? If you look at oil and gas, GDP per hour, that’s how we measure productivity, it’s higher than virtually any other industry. I don’t think there’s another industry in Canada that has higher GDP per hour worked, and you get higher compensation per hour too. So, yeah, I just looked it up this morning. Over $400 GDP per hour worked in 2017 dollars, and about $94 compensation per hour, much higher than the average for the other industries.
Jackie Forrest:
Okay. So you are going to be releasing this new paper. It’s a second paper, which we will put a link to in the show notes, and ATB and Studio Energy have really… You’ve got your strengths in terms of… Peter, you have the model of the oil and gas upstream and, Mark, ATB has the economic model. So maybe just quickly talk about… your goal was to measure what is the kind of complete GDP impact. Because as you say, Peter, many of these studies sort of are too narrow. So when you look at the whole life cycle, tell us how you went about looking at that problem and then we can get to your results.
Peter Tertzakian:
Sure. Well, I can talk about the inputs and the work that we did, which was to understand the cost of the pipeline, how it would be deployed over the course of the next 10 years. And not just one pipeline, there’s half a dozen in the queue. We risked the probability of how those pipelines would be developed over the course of 10 years and the costs of each. And then, also, our model goes into a lot of detail in terms of understanding the costs and, of course, the capital expenditures. Therefore, filling the pipeline and sustaining the production of the pipeline once it’s finished and the value of the exports, those were then handed over to ATB and Mark’s team who then used those outputs as inputs to the broad Canadian GDP model.
Mark Parsons:
Jackie, the genesis of this is I wanted to quantify the potential pipeline impacts from the MOU, and I thought, “Well, I need someone who really understands the energy side.” So I talked to Peter and Peter’s like, “Well, I got oil and gas model. I can tell you how much it’ll cost to fill the pipeline, how much it cost to build pipelines and everything.” I said, “Well, this is perfect.” Peter gave me the inputs to the model and we ran it, and now we have some results of that.
Peter Tertzakian:
Yeah, it was a great team effort. On our side, there was several people that contributed to this. On your side as well, you had the support teams. So this was a fairly major effort using the sophisticated modeling that you have on your end in terms of figuring out the GDP, not just of the pipeline, but the whole thing scheduled over the course of the next 10 years to 2035. Well, tell us about the numbers.
Mark Parsons:
Yeah. So a significant uplift. There’s basically two big phases here. There’s the constructions, building the pipelines, and then filling the pipelines at the same time. So we assume those two things happen. We also build in the pathways carbon capture project because that kind of goes hand-in-hand with building a pipeline with the-
Peter Tertzakian:
And the MOU.
Mark Parsons:
… the MOU. So what we looked at is what would it cost to fill one and a half million barrels per day, pipeline capacity, which Peter’s estimates would have been about $100 billion. We translate that into an annual number, and we convert it to real inflation-adjusted measures. And what we get is for Canadian GDP, the impacts peak around 2033 where the economy is about $40 billion larger that year than it would be otherwise without all those projects, and that’s a lift of 1.4%. You’d say, “Well, 1.4% doesn’t seem a lot,” but in an era where we’re struggling to eco-out hardly any growth, that’s a very significant improvement and that really flows through to GDP per capita.
Peter Tertzakian:
Okay. Let’s just get specific on that 1.4%. $40 billion, which is by the way, not a one-year thing, it’s an ongoing thing-
Mark Parsons:
Well, yeah, that’s just for one year.
Peter Tertzakian:
Yeah.
Mark Parsons:
Yeah.
Peter Tertzakian:
You take $40 billion and divide it by the total size of the Canadian economy.
Mark Parsons:
That’s right, to get the 1.4.
Peter Tertzakian:
Yeah.
Jackie Forrest:
So the IMF is expecting that our overall growth for the whole country this year would be 1.6. Am I correct to add in that given year, the 1.4 to that?
Mark Parsons:
But you would have to go out to that 25 year-
Jackie Forrest:
So we could almost nearly double our economic growth in some years. I think your average for the 10-year period is a little bit lower, like 1.1%, but it’s very significant when you think about our goal of being the fastest-growing economy. To beat the Americans, we need to be more than 2.4. So this 1.5 million barrels a day of pipeline projects, some of it West Coast pipeline, some of it expansions, could actually get us there?
Mark Parsons:
What I’m saying is by 2033, the economy would be 1.4% larger than it would be without those projects. So, yeah, that growth isn’t going to happen in one year, it’s going to scale up to that, but that’s how much larger the economy is. Not only that, but GDP per person, because really the population’s driven by federal immigration policy, it’s not really going to change. That translates into a 1.4% increase in GDP per head. I think it’s important also to understand that our modeling accounts for things like capacity constraints. So we’re not just saying, “Well, we have an infinite number of people, we can throw at these things.” There’s movement within the economy, there’s only so many people. So there’s maybe a little bit less activity in some areas, but there’s going to be more in others, so there’s going to be some re-allocations. We try to account for all that.
Peter Tertzakian:
I want to highlight a couple of other really important things. Again, this one is something that you don’t really see unless you really go deep under the hood and dissect it, and that is the imports versus exports. So in the early years of building these pipelines, we actually have a net deficit of exports minus imports because we have to import steel and all this other stuff, right?
Mark Parsons:
Yeah. We get this big boost from investment, but some of it’s lost to the fact that we have to import from other countries.
Peter Tertzakian:
So isn’t this an argument for more interprovincial trade?
Mark Parsons:
It’s an argument for more interprovincial trade. It’s an argument for having supply chains domestically that can feed these industries.
Peter Tertzakian:
Yeah, because people look at this and say, “Oh, well, the only people to benefit are Alberta, BC because it goes to the West Coast.” But in actual fact, if you’re looking at the situation in other parts of the country or even leading the country, you should be saying, “Well, how can we reduce the imports? How do we get it so that interprovincial trade barriers are reduced so we supply ourselves?” That would even give even more of a GDP kick, and it would be more evenly spread across the country.
Mark Parsons:
That’s exactly right.
Jackie Forrest:
Mm-hmm. The only downside to that is if it’s way more expensive to get it done in Canada, it can hurt the economics of the project-
Peter Tertzakian:
I get it, but I think being creative and understanding the under-the-hood issues here allows us to formulate better strategy and policy.
Jackie Forrest:
Right. Well, certainly, and I do encourage everyone to look at the paper. We have a chart that sort of shows that one-two punch, how you have the capital spending in the first phase and then the exports. All right. Well, let’s talk about the jobs. How many jobs were added when you considered the whole picture?
Mark Parsons:
Yeah. On average, over the period 2027 and 2035, is 112,000 additional jobs every year.
Peter Tertzakian:
On average.
Mark Parsons:
On average, and the employment impact peaks at 2031. That’s during peak construction. So as you’re throwing a lot of people on construction sites, 136,000 jobs across the country in just that one year.
Peter Tertzakian:
Yeah. I want to add an important point here. There’s a lot of assumptions that go into something like this and some of the key assumptions are, number one, the investment dollars are there and we are attractive enough for investors to come and build and fill the pipes. We assume that there is enough labor in the pool, and that it can be allocated without creating massive amount of inflation. We have to assume that there’s no regulatory delays and such things, which we know the Major Projects Office is working hard to try and remedy and streamline our regulatory processes. So there’s a lot of assumptions in here, but it’s a good exercise to show what is possible.
Mark Parsons:
Yeah. It’s really… I don’t want to call it a thought experiment, it’s more than this. It could actually happen, but it just shows what’s possible.
Jackie Forrest:
Now, there’s a regional breakdown as well. You’re quoting Canada-wide numbers. What are the Alberta and BC numbers?
Mark Parsons:
Yeah. The biggest uplift, of course, is in Alberta because that’s where a lot of the upstream oil and gas investment is, some of the pipeline construction, although we put about 80% of it in BC. BC gets an uplift from the pipeline construction. So their economy is, in 2035, about 0.7% larger. In 2029, it’s about 0.9% larger. Alberta gets a kick of 4.6% in 2029, and then 6% in 2035 relative to the business-
Jackie Forrest:
Because of all that upstream investment occurring there?
Mark Parsons:
Yeah.
Jackie Forrest:
Yeah.
Mark Parsons:
So you’re seeing it across the country, but it’s concentrated in Alberta and BC.
Jackie Forrest:
Right. But to Peter’s point, if you could make more things in other parts of the country, there’d be more benefit. Well, as we wrap up, maybe you’ve been out talking to people with these results. I know the paper’s just coming out, but I know, Peter, you were in Ottawa talking to people.
Peter Tertzakian:
Mm-hmm.
Jackie Forrest:
What has been the reaction? Has it opened people’s eyes to the economic benefit from some of these projects?
Peter Tertzakian:
Yeah. The quantification combined with the detail in terms of the schedule of how such a thing unrolls provides a good framework for thinking and talking about the project. Also, now with this template, we can do a couple of things. One is say, well, what happens if we accelerate the construction of this by reducing regulatory drag, which is, again, something that the Major Projects Office is very interested in, or can we apply this template to LNG? Or for that matter, any of these types of projects that are not just about building singular pieces of infrastructure? It’s building the infrastructure and then creating the supply chains and seeing what happens as you go from building the infrastructure to supplying the goods, transporting them and selling them.
Mark Parsons:
Yeah. No, exactly. It really gives us a framework for how to think about this. If we’re going to build major projects, which I really think if we’re trying to change that trajectory for investment, it is, to your point, Jackie, like a major projects issue, because they tend to be anchor projects for broader employment investment impacts. So I just think that if we’re going to be talking about it a lot, we should start quantifying it, but it doesn’t really change the fact that we need this now. I look at the Canadian economy and I thought, “Well, what’s going to drive the next leg of growth for Canada? As I said, I don’t think it’s the consumer because we’re not going back to 0% interest rates. Debt is already high, household debt’s high. How much more can the government spend? And we showed you the chart on that, it’s been rising quite quickly. I think it’s got to be investment, and then that’ll give you the exports. This is one way to do it.
Jackie Forrest:
Right. Well, and it is certainly more urgent than ever. We had the MOU in November. That almost seems like another world. It was important then, it’s even more important now. We have our allies around the world who are looking for secure, stable oil and gas, and we need to build the pipelines to do that. With that, I think we’ll wrap it up. Thank you, Mark, chief economist from ATB, and thank you to our listeners. If you enjoyed this podcast, please write us on the app that you listen to and tell someone else about us.
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