Oil Prices and the Canadian Economy—Events and Impacts

Telling Canada’s story in numbers

Talking StatsConnecting. Collaborating. Learning.

Anil Arora

Chief Statistician of Canada

March 17, 2017October 19, 2017

Oil Prices and the Canadian Economy—Events and Impacts

www.statcan.gc.ca

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Catalogue no. 11-631-X ISBN 978-0-660-23639-1 ISSN 2368-6723

Outline

Statistics Canada • Statistique Canada

IntroductionWho we are and what we do. 1

Events: Prices

Movements, measures and margins 2

Impacts: Selected

Government, business and consumers 3

4

SummaryMoving forward and next steps

2

Who we are: Statistics Canada

3Statistics Canada • Statistique Canada

Capacity-building nationwide and government-wide on the use of statistics

EVENTS: PRICES


o Movements

o Measures

o Margins

Oil price movements


Sources: Raw Materials Price Index, CANSIM table 330-0008; U.S. Department of Energy; Goldman Sachs.

Iran–

Iraq

War

Gul

f War

Glo

bal g

row

th

9/11

and

inva

sion

of I

raq

Liby

an

Civ

il W

ar

U.S

. sha

le

oil b

oom

Vene

zuel

an g

ener

al s

trike

OP

EC

pro

duct

ion

cuts

and

risi

ng

Asi

an d

eman

d

Global production by region

0

10

20

30

40

50

60

70

80

1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015

Other Countries OPEC United States Canada

millions of barrels per dayWorld crude oil production by region, 1985 to 2015


Source: U.S. Energy Information Administration (EIA).

Canadian production by type


Source: Historical supply and disposition of crude oil and equivalent, CANSIM table 126-0001.

0

200

400

600

800

1 000

1 200

1985 1990 1995 2000 2005 2010 2015

Heavy crude oil Light and medium crude oil

Crude bitumen Synthetic crude oil

Canadian crude oil production by type, 1985 to 2015millions of barrels

80%

20%

Alberta Canada, other

Share of total production, February 2016

Gasoline value chain

Industrial Product

Price Index

(IPPI)

Wholesale Services

Price Index

(WSPI)

Retail Services

Price Index

(RSPI)

Consumer Price

Index

(CPI)

Raw Materials

Price Index

(RMPI)

Factors affecting the observed price of crude oil…- Production- Shocks- Market speculation

…affecting production costs…- Margins: refinery, wholesale and retail- Transport costs- Duties and taxes

…affecting consumer prices- Seasonality- Final demand- Excise taxes


Price of gas falls less than oil


Sources: Raw Materials Price Index, CANSIM table 330-0008; Industrial Product Price Index, CANSIM table 329-0075; Consumer Price Index, CANSIM table 326-0020.

Wholesale and retail margins increase


Sources: Statistics Canada, Wholesale Services Price Index, CANSIM table 332-0029; Retail Services Price Index, CANSIM table 332-0024.

Sources: Natural Resources Canada and Kent Group data.

Sources: Natural Resources Canada and Kent Group data.

80

90

100

110

120

130

140

Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr

2011 2012 2013 2014 2015 2016

WSPI (Petroleum wholesalers) RSPI (Gasoline stations)

index (2011=100)Gasoline margin indices, Canada, 2011 to 2016

64,2

17,0

7,5

39,4

0

20

40

60

80

100

120

Taxes

Marketing operating margin

Refiner operating margin

Crude costs

Gasoline prices, 2013

cents per litre

33,1

22,9

8,8

38,1

0

20

40

60

80

100

120

Gasoline prices, 2016

cents per litre

Effect of price decline on the CPI


Source: Consumer Price Index, CANSIM table 326-0020.

IMPACTS: SELECTED


o Government

o Business

o Consumers

ALBERTA

2011 2016Unemployment rate 5.9% 8.5%Net migration 15,968 -10,113Oil production (m3) 122 million 166 million

Focus on Alberta, 2011 to 2016

13

GOVERNMENT SECTOR


Investment income important to provinces

Source: Revenue, expenditure and budgetary balance - General governments, CANSIM table 380-0080.

30%

45%

17%

7%

1%

Government revenues by sectorAverage (2010 to 2016)

Federal (S131)Provincial and territorial (S132)Local (S133)Social security funds (S134)Aboriginal (S135)

0%

10%

20%

30%

40%

50%

60%

70%

Revenue by component Average (2010 to 2016)

Federal Provincial Local


Royalties revenue declines with oil prices

Sources: Revenue, expenditure and budgetary balance - General governments, CANSIM tables 380-0080 and 384-0047.

0

2 000

4 000

6 000

8 000

10 000

12 000

Royalties Interest andOther

InvestmentIncome excl.

Royalties

BankingServices

RemittedProfits of

GBEs

CAN

$ m

illion

s

Alberta’s average share, 2010 to 2014

AB Rest of Canada

0

5 000

10 000

15 000

20 000

25 000

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

2010 2011 2012 2013 2014 2015 2016

CAN

$ m

illion

s

Investment income by component

Royalties

Interest and other investment income

Banking services

Remitted Profits of GBEs


Royalties and provincial revenues decline

Source: Revenue, expenditure and budgetary balance, CANSIM table 384-0047.

6%

93%

1%Governmentshare

Federal Provincial Aboriginal

9%9%

0%

8%10%

-19%

-0,25

-0,20

-0,15

-0,10

-0,05

0,00

0,05

0,10

0,15

2010 2011 2012 2013 2014 20150

10 000

20 000

30 000

40 000

50 000

60 000

Perc

enta

ge

CAN

$ m

illion

s

Alberta revenue and growth rate, 2010 to 2015


0%10%20%30%40%50%60%70%

Average (2010 to 2014) 2015

Alberta's share

Alberta Rest of Canada

BUSINESS SECTOR

• Construction industry• Producer prices• Building permits and housing starts• Lending by small institutions


Construction sector (NAICS 23) C

onst

ruct

ion

(NA

ICS

23)

Residential building

Non-residential building

Engineering

Repair

Other activities of the construction industry

Sources: CANSIM tables 379-0030 and 379-0031.

100 000

105 000

110 000

115 000

120 000

125 000

130 000

2011 2012 2013 2014 2015 2016

milli

ons

of c

hain

ed (2

007)

dol

lars

Construction-sector real GDP


Construction-sector output (GDP)

Source: Special compilation, Industry Accounts Division.

2011 2012 2013 2014 2015 2016

annual % changeConstruction 3.9 7.9 4.4 2.4 -4.6 -3.3

Residential building 0.5 8.7 3.9 1.9 2.8 1.5

Non-residentialbuilding

1.8 0.5 -2.5 -1.9 -0.5 -2.8

Engineering 7.8 12.3 6.8 4.5 -15.0 -10.3

Repair 4.1 4.5 6.0 2.3 2.8 1.4

Other activities of the construction industry

7.2 5.9 7.4 3.3 -4.8 -5.1

Transportation(23C1)

Oil and gas (23C2)

Electric power(23C3)

Communication(23C4)

Other(23C5)

14.3

- 31.7

-6.3

6.2

- 7.3

% change


How big is the oil and gas engineering industry?

70%

60% 40%

Engineering construction except oil and gasOil and gas engineering - AlbertaOil and gas engineering - Canada, other

Excluding

oil and gas

Oil and gas

75%

Alberta

Canada,

other

25%

Source: CANSIM table 379-0030.


Engineering construction

Average GDP, 2007 to 2013 (current dollars)

Oil and gas engineering construction


Employment in oil and gas engineering slowsAnnual change, 2011 to 2016

28%

17% 20%

3%

-6%-12%

19%

2% 13%

-1%

2% 0%

-15%

-10%

-5%

0%

5%

10%

15%

20%

25%

30%

35%

2011 2012 2013 2014 2015 2016



Impact on other industries Producer price indices, 2011 to 2016

Sources: CANSIM tables 332-0017 and 401-0041.


0

20

40

60

80

100

85

90

95

100

105

110

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

2011 2012 2013 2014 2015 2016

do

lla

rs p

er

ba

rre

l

index (2013 Q1 = 100)

WCS Trucking-general Freight Air Fare Engineering Services

ALBERTA HOUSING INDUSTRY

• Building permits

• Housing starts


Building permits value, Alberta and Canada

0,3%

8,2%

-3,9%

4,9%

2,6%

4,8%11,8%

14,8%

17,7%

5,8%

-8,2%

-15,2%-20%

-15%

-10%

-5%

0%

5%

10%

15%

20%

2011 2012 2013 2014 2015 2016

Rest of Canada Alberta

Source: Building permits, CANSIM table 026-0006.

annual percent change


Building permit value, Calgary and Edmonton

46,5%

1,2%

36,1%

2,6% -2,2%

-24,3%

-0,5%

18,5%

14,7%

16,9%

-7,1% -9,7%

-30%

-20%

-10%

0%

10%

20%

30%

40%

50%

2011 2012 2013 2014 2015 2016

Alberta Calgary, AB Edmonton, AB


Source: Building permits, CANSIM table 026-0006.


Housing starts by type, Alberta and Canada

15,1%

-21,5%

51,3%

-42,3%

-60%

-40%

-20%

0%

20%

40%

60%

2011 2012 2013 2014 2015 2016

Canada, total units Alberta, total unitsAlberta, single-detached Alberta, multiples




Credit union consumer loans, Alberta and Canada

-2%

-1%

0%

1%

2%

3%

4%

5%

6%

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

2011 2012 2013 2014 2015 2016


Source: Industrial Organization and Finance Division.

annual growth rates


HOUSEHOLD SECTORSelected consumer spending


Retail trade, Alberta and Canada

Alberta +32% -4.2%Other provinces +13% +11.2%

• Spending in Alberta grew faster until October 2014, but then reversed

95

100

105

110

115

120

125

130

135

ind

ex (

20

11

/01

=10

0)

Monthly Retail Trade Survey (January 2011 = 100)



$6.4 billion

$47 billion

June 2014


-6,0

-4,0

-2,0

0,0

2,0

4,0

6,0

8,0

10,0

2011 2012 2013 2014 2015 2016

ann

ual

gro

wth

(%

)

Retail trade growth in Albertaby subsector, 2011 to 2016

Motor vehicles and gasoline drive changes

Share of sales



Albertans buying fewer motor vehicles• The number of cars and trucks sold declined in Alberta in 2015 and

2016, but increased in the rest of the country


0

50

100

150

200

250

0

2 000

4 000

6 000

8 000

10 000

12 000

2010 2011 2012 2013 2014 2015 2016

cou

nt

(th

ou

san

ds)

$ m

illio

ns

Alberta new motor vehicle sales,dollars and units, 2011 to 2016

Total Value Passenger cars Trucks


95

100

105

110

115

120

125

130

135

140

ind

ex (

20

11

/01

=10

0)

Survey of Food Services and Drinking Places (Jan. 2011 = 100)

Alberta Remaining Provinces

Restaurant and food services spending

Alberta +34% +0.7%Other provinces +18% +13%

June 2014


$753 million

$5.5 billion


Other provinces

Albertans switch to lower-priced restaurants


-150

-100

-50

0

50

100

150

200

250

300

350

2011 2012 2013 2014 2015 2016

Ch

ange

in s

ales

, $ m

illio

ns

Annual change in sales by establishment type, Alberta, 2011 to 2016

Full-service restaurants Limited-service eating placesSpecial food services Drinking places (alcoholic beverages)


SUMMARY


o Moving forward

o Recap

o What’s next

Alberta: Demographic strength…

Source: Census of Population.Source: Census of Population.


11,6%

5,0%

0%

2%

4%

6%

8%

10%

12%

Alberta Canada

Population growth, 2011 to 2016

12,3%

16,9%

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

Alberta Canada

Population aged 65 and older, 2016

…and labour market resilience


$-

$200,00

$400,00

$600,00

$800,00

$1 000,00

$1 200,00

2011 2016

Average weekly earnings

Alberta Canada

0%

10%

20%

30%

40%

50%

60%

70%

80%

2011 2016

Labour market participation rate

Alberta Canada



$0

But is it different this time?

The situation has changed.

• A structural shock or cyclical change?o Need to broaden the economic base

• A changing labour market composition?o Need to include more Aboriginal peoples

• An adaptation to a lower-carbon world?o Need to consider pricing, tax policy, clean

technology…38

A structural change in Alberta?



5,9

8,5

0

2

4

6

8

10

Jan2001

Jan2002

Jan2003

Jan2004

Jan2005

Jan2006

Jan2007

Jan2008

Jan2009

Jan2010

Jan2011

Jan2012

Jan2013

Jan2014

Jan2015

Jan2016

Jan2017

Unemployment rate, January 2001 to August 2017

Canada Alberta

%

.. . . . . . . . . . . . . . . .

Sectoral changes in Alberta employment



60

80

100

120

140

160

180

200

Index of employment in Alberta by NAICS industry sectors, January 2001 to August 2017

All industries Forestry, fishing, mining, quarrying, oil and gasConstruction ManufacturingProfessional, scientific and technical services

index (January 2001=100)

Aboriginal education and employment

Source: Labour Force Survey.

0%

20%

40%

60%

80%

Alberta Canada

Employment rate (ages 15 and older) by Aboriginal identity, 2016

Aboriginal Non-Aboriginal

0%

20%

40%

60%

80%

No certificate,degree or diploma

High school or post-secodary

Educational attainment by Aboriginal identity, Alberta, 2011

Aboriginal Non-Aboriginal

Source: 2011 National Household Survey.


High school or postsecondary

Lower carbon = Economic diversification?

42

Recap

• Canadians are “price takers” in the global oil market, and, since 2014, gasoline prices have not fallen as far as crude oil prices

• Alberta’s reliance on oil production made it vulnerable to the price decline, with impacts felt in public finance, business and consumer behaviour

• Alberta is poised to recover with its strong demographics and labour market resilience, but there may be some challenges ahead

43

What’s next: Delivering better data

Canadian housing statistics

National Travel Survey

Clean technology

data

Big data for

consumer and retail spending

Remote sensing

tools

City-level GDP

estimatesCanadian Centre

on Trans-portation

Data


A modern, responsive statistical agency

• Moving beyond a survey-first approach with new methods and integrating data from a variety of existing sources

• Making our data easier to access and use by adopting new tools to analyze and visualize data

• Helping more Canadians use data to make evidence-based decisions


46

Thank you!

For more information, visit www.statcan.gc.ca

#TalkingStats

http://www.statcan.gc.ca/

Documents

Oil Prices and the Canadian Economy—Events and Impacts