Mention the Alberta economy and two things are sure to come up: the importance of oil and gas and the need to “diversify” the economy.

Even though there are lots of other elements to Alberta’s economy, the oil and gas sector is top of mind because it represents a huge slice of the total pie.

There are different ways to express oil and gas extraction’s contribution to Alberta’s GDP. If we edit out price changes and look at what’s called “real” GDP, the mining, quarrying, and oil and gas extraction sector (data on just oil and gas extraction are not available), produced 24 per cent of Alberta’s output in 2014 compared to 27 per cent in 2018.

If we keep price changes in play and look at “nominal” GDP, the sector accounted for 27 per cent of Alberta’s output in 2014 (when prices were relatively high) compared to 17 per cent in 2018 (when prices were relatively low).

In both cases, mining, quarrying, and oil and gas extraction (which does not include the many other businesses that depend on it) looms large over the Alberta economy whereas it accounted for less than 8 per of Canada’s real output in 2018 and just 3 per cent if you exclude Alberta.

From purchasing products and services from other provinces to the federal tax revenue it generates, oil and gas extraction is a critical driver of the national economy, but it’s simply not as important as it is in Alberta, Newfoundland and Labrador, the Northwest Territories, Nunavut, and Saskatchewan. 

Canada’s two largest provinces—Ontario and Quebec—engage in virtually no oil and gas extraction. And while natural gas is important to the BC economy, it still only accounts for less than a few percent of its total annual output.

Given all this, oil and gas is clearly a big deal in Alberta. So why has economic diversification—either in addition to or instead of—oil and gas been such a popular topic in the province for the last 50 years or so? Check out tomorrow’s edition of The Owl for the answer.