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Oil is by far the biggest money-generating commodity Canada exports

Aug 16, 2018 - one year ago

By Supply Post

Millions and millions of dollars in taxes and royalties are being lost because of delays in twinning the Trans Mountain Pipeline. Second in a series on the economic impacts of the project.

By Don Hauka

Nothing else comes close to generating large economic benefits for Canada the way crude oil does.

The revenues generated by crude oil exports helps pay for the services we expect like health care and education. They also offset economic sectors where we’re in a trade deficit, such as the $34.7 billion black hole in electronic equipment – our iPhones and all other hi-tech gear at the heart of modern life.As noted economist and commodities guru Patricia Mohr says, the trade figures speak for themselves. They're not a political issue, they're economic facts. The fact is that according to national trade data for 2016, net exports of crude oil alone created a trade surplus of $33.1 billion for Canada.

Oil is by far the biggest money-generating commodity we export. Nothing else comes close, with metals and minerals a distant second. That oil money helps Canada as Mohr, formerly of Scotiabank, reminds her audiences. You can check out Mohr's presentation and check her statistics here.

That's how things look right now. But if the TMEP gets built and increases our export capacity, our ability to pay the bills (and maybe even pay down the government credit card) improves dramatically.

Canada will earn an additional $46.7 billion in taxes and royalties to federal and provincial governments alone in the first 20 years of operation.

That figure comes from the Trans Mountain Expansion Project Overview. Want a second opinion? Consulting firm Muse Stancil's September 2015 report details further benefits, including an estimated $73.5 billion over the first 20 years operation by giving Western Canadian crude oil producers access to Pacific Basin markets. The revenues to be realized will benefit all Canadians, not just Albertans.

So what's the cost of delaying TMEP? Mohr's former colleagues over at Scotiabank issued a report in February showing that oil producers lose $30 million to $40 million dollars a day because of delays in increasing our pipeline capacity. Western Canada’s oil production has been growing and sometimes exceeds export pipeline capacity.  As oil inventories build up in Canada, that results in our oil having to be sold at a bigger-than-normal discount in the U.S. market. The report notes: "If maintained at current levels, the discount on Western Canadian oil would shave C$15.6 billion in revenue annually from the sector."

Mohr calls that "a self-inflicted wound." It means millions and millions of taxes and royalties that are being lost – money that could be used not just for services, but for paving the way to the green economy via research and development to help reduce the oil and gas sector's carbon footprint.

As Mohr says: "Sounds like a lot doesn't it?"

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