Canadian Energy Weekly Round-Up: July 27, 2020
Here are the top news stories covering Canada’s energy landscape:
The Canadian Economic Recovery is Tied to the Trans Mountain Pipeline, BIV Reports
In order to bring Canada’s economy back to pre-pandemic performance levels, one crucial project will determine just how quickly the economic turnaround will be.
In December 2019, construction crews broke ground on the $12.6 billion extension of the Trans Mountain Pipeline—a key victory after years of legal challenges. The extension project aims to connect Strathcona County, Alberta to the ports of Burnaby, BC and will increase nominal capacity of the current system from 300,000 barrels per day (bpd) to 890,000 bpd. Now, 6 months into the COVID-19 pandemic, BIV reporter Nelson Bennett argues the completion of the Trans Mountain Pipeline is crucial to a steadfast recovery for the Canadian economy:
“The most immediate economic impact will be from its construction. The project’s workforce is already approaching 5,000 in B.C. and Alberta, Trans Mountain Corp. says. At peak construction in 2021, the company expects, more than 5,500 workers to be employed on the project.”
On top of creating thousands of jobs, which can help provide immediate relief to displaced workers, the expansion of the Trans Mountain pipeline is crucial to quelling relief for Canadian crude producers who had to lower their price points due to demand and trade challenges. As demand for crude oil is expected to grow, reaching demands upwards of 100 million bpd by 2022, Canadian producers anticipate to generate more revenue with the Trans Mountain pipeline extension.
Policies Designed to Limit Energy Use Hinder Economic Growth, Report Finds
Policies geared towards limiting consumers’ energy use are putting a stint in restarting the economy after COVID-19, a new report from the Fraser Institute finds.
In their new report, the Frasier Institute analyzed the current economic performance during the COVID-19 pandemic against policies that limit consumers’ energy use. Proving that the current economy is in a severe downturn, the Frasier Institute examined the role of energy abundance as an essential component to Canadian economic growth:
“Empirical research has examined the relationship between energy consumption and real gross domestic product (GDP) in Canada and has shown that energy abundance is an essential input for Canadian economic growth.”
The study’s authors conducted an econometric analysis of energy use and Canadian GDP growth. Based off their analyses, they discovered there is a positive long-run relationship between energy use and real GDP in Canada. More specifically, a 10% increase in energy consumption or abundance is associated with a 1.16% increase in GDP. In addition, the authors found that the direction of causality between the two variables runs from energy consumption to GDP:
“In other words, the study found that increases in GDP do not cause4 increases in energy use, but increases in energy abundance do cause increases in GDP.”
The Fraser Institute’s report concludes that the best method to increasing Canada’s GDP growth is to increase energy consumption and to remove federal and provincial policies that artificially limit energy use.
For more Canadian energy news and setting the record straight on the day’s top stories about the oil and natural gas industry, visit Canadian Energy Network.