With economic gloom all around us, Canada is going to have to be a lot more self-reliant if it wants to keep on creating jobs and prosperity in the years to come, warns Avery Shenfeld.
Fortunately, he has an idea that might help. Shenfeld, chief economist at CIBC World Markets, believes that Canada can leverage its already-strong position as an energy giant simply by hustling to get moving on many billions of dollars worth of petroleum and electricity-generation projects, many already on the drawing board.
The payoff could be impressive.
Shenfeld and colleague Benjamin Tal calculate it would include tens of thousands of extra jobs each year for the next couple of decades, along with a nice bump in corporate earnings and export revenues as projects are completed.
To be clear about this, Shenfeld doesn't claim that this is a cure for all of our economic challenges, just a nice trump card to be able to play at a time of spreading economic distress.
After all, it's not as if we have a lot of other good choices here.
We could try to pep up Canada's growth by boosting domestic spending, but we already did that to offset the drag from the last recession. It worked well, but with interest rates already low and consumers heavily indebted, this technique won't take us much farther. Neither will government stimulus, since most Canadians think it's time to get deficits under control.
That's the appeal of Shenfeld's idea: it involves no government stimulus and no artificial boost to consumer spending, just the mobilization of corporate cash that's available in abundance.
He and Tal have drawn up a long list of energy projects that could be going full blast within 10 years, and he's suggesting Canada could get a nice economic boost if we simply make sure they go ahead without too much time lost.
Obviously, that doesn't mean shoving aside the careful assessments that any major project needs, he says, but "sometimes in our history we have had very lengthy processes that wound up giving the green-light anyway," A prime example: the convoluted proceedings that held up approval of the Mackenzie Valley pipeline for 37 years.
The best opportunity for energy development is in projects tied to oil and gas. Canada has become the biggest outside supplier of oil to the U.S. and that country's need for petroleum supplied from politically stable economic partners will only grow over the years.
Cumulative capital investment here could approach $95 billion by 2015 and nearly double to $180 billion by 2020, estimate Shenfeld and Tal. They see petroleum and pipeline investment generating roughly 300,000 person-years of employment by 2020 and another 400,000 by 2030.
The other big energy opportunity is electricity. Nearly $50 billion worth of hydro projects are already on the drawing boards for this decade, and unlike petroleum, these opportunities are scattered across Canada.
The Lower Churchill project in Newfoundland is by far the largest, followed by Quebec's big Romaine and Eastmain projects. There are also major plans in Manitoba, British Columbia and Ontario. And even once all these plans are realized, only about one-third of Canada's hydroelectric potential will have been tapped, leaving room for much more investment.
By 2030, Shenfeld and Tal estimate that Canada could invest a total of $195 billion in power generation, including hydro, wind, solar and natural gas plants. Add to this the $100 billion or so we'd spend to transmit this power to homes and businesses and the total comes to $295 billion, enough to support about 320,000 person-years of employment.
The total energy-investment job estimate of more than one million personyears breaks down to about 50,000 jobs per year for the next two decades. That's not the difference between poverty and prosperity, but it's a nice bonus. If we had an extra 50,000 jobs in Canada today, the unemployment rate wouldn't be 7.3%; it would be 7.1%.
And of course, this doesn't count the permanent economic boost Canada would get from selling the output of all these oil, gas and electricity projects.
