Capital investment is crucial to the economy. Investment creates jobs, economic growth, and revenues for governments to help fund our schools, hospitals and roads.
Capital investment has plunged here in Canada, while it improves elsewhere. For example, capital spending has decreased 50% since 2014 – in the U.S. it has increased by about 38%.
It’s easy to understand why – while the U.S. has streamlined its regulatory system, Canada’s has become more complex and uncertain, and our inability to move forward on pipeline projects has driven away investment to other jurisdictions such as the United States.
Each quarter, CAPP publishes its Capital Investment and Drilling Forecast, which provides an overview of the impact of declining commodity prices, upstream capital investment in Canada and industry capital spending.
Capital Investment in Canada’s Oil and Natural Gas Industry
Source: Statistics Canada and CAPP, 2019
The global market is fierce, and if Canada wants its industry to be a major player internationally, a number of factors need to be considered.
Rising government costs, the burden of inefficient regulations, and the lack of infrastructure to move Canadian energy to growing markets are all undermining investor confidence in Canada and negatively affecting the country’s ability to attract the capital needed to create jobs and national prosperity.
Investment and Tax Revenue
The oil and natural gas industry is Canada’s largest private sector investor, with oil sands alone injecting almost $14 billion into the economy in 2017.
The oil sands industry and its suppliers contribute to government revenues through corporate taxes, personal income taxes, property taxes, royalties, land sales and other costs.
Over the next 10 years, the oil sands industry is expected to pay an estimated $17 billion in provincial and federal taxes – including royalties (Canadian Oil Sands Supply Costs and Development Projects, 2019 – 2029, CERI). These revenues contribute to government spending on infrastructure, social services and other important programs. A healthy oil sands industry results in higher revenues for governments.