In this week’s The Seven… 

• Where’s the beef? - More major projects announced
• Back to work - U.S. shutdown finally ends
• Hot off the digital press - New global oil and gas outlook
• Next week - Inflation numbers for October on Monday
• Interesting Fact: Reversal of fortune - The Capline Pipeline
• Chart of the Week: Declining GDP per capita

“It's time to try defying gravity”

—"Defying Gravity" from Wicked

There wasn’t much in the way of hard economic data to chew on this week, but between the end of the U.S. government shutdown (whew), another list of major projects the federal government wants to fast track (meh), and a new outlook from the International Energy Agency (hmmm), there was lots of economy-related news to process.

And, as our Chart of the Week highlights, these and other stories are unfolding against a backdrop of negative economic growth in both Canada and Alberta when measured on a per capita basis. Channelling the pre-game pep talks that will be given at Sunday’s Grey Cup, we can overcome the challenges holding back growth, but it won’t be easy and we’ll have to take some gravity-defying economic leaps.

Where’s the beef? More major projects announced, but no oil pipeline

In a speech in September, the Prime Minister described the approval process for major infrastructure projects as arduous and inefficient. “We used to build big things in this country, and we used to build them quickly,” he said.

It’s apparently too difficult to fix the process for all projects that come forward, so the idea is that the federal government will select a limited number of “nation-building” projects* and seek to fast track them.

The first five winners announced by the federal government in September were an LNG project, a small modular nuclear reactor project, two copper mines, and upgrading the Port of Montreal.

On Thursday, a second list of projects was announced: a critical minerals mine, a nickel mine, a graphite mine, a hydro project in Nunavut, another LNG project, and an electricity transmission line.

Federal funding over and above the $214 million budget for the Major Projects Office may or may not be involved in each project,** but the goal is for the private sector to do the heavy financial lifting via billions of dollars in business investment. It is, however, an open question of how much of the investment these projects might attract will be new dollars as opposed to what would have been invested anyway.

Non-residential business investment in Canada last year totalled $350 billion. If the $116 billion of investment the PM says these projects will generate is spread over, let’s say, three years, that works out to about $39 billion per year or a 11% annual increase. This assumes it’s new investment that wouldn’t have happened anyway, it’s all private sector money (which it won’t be), and does not pull dollars from other projects. I’m not an expert in the market feasibility, risk and ultimate value of these projects, but that seems like a decent start.

One could, however, suggest two rather large quibbles:

1) Initial or not, if this list is meant to inspire a new era of massive investment and strong economic growth in Canada, it falls short on the “transformative” theme. As the Business Council of Alberta argues, more work needs to be done to improve Canada’s overall investment climate.

2) The absence of a major oil pipeline project (or even a minor one) and a major carbon capture initiative on the latest list is a potentially telling omission about the federal government’s support for such projects. With that said, there have been talks between Premier Smith and the Prime Minister that could change the narrative. But for now, Alberta’s oil patch remains in limbo.

*The criteria for picking projects are that they:

• strengthen Canada’s autonomy, resilience, and security;
• have clear benefits for Canadians;
• have a high likelihood of being completed;
• contribute to clean growth and Canada’s climate goals;
• advance the interests of Indigenous Peoples.

**An example of federal funding support that has been committed is a loan of $139.5 million to B.C. Hydro to fund the early stages of the North Coast Transmission Line project announced Thursday by the Canada Infrastructure Bank.  

Back to work - Record-long U.S. government shutdown finally over

In shutdown mode since October 1, the U.S. federal government reopened this week. As we reported in last week’s Seven, the economic hit will show up in the fourth quarter with a subsequent bounce-back to start 2026, forming a V-shape on the GDP charts. With that said, it’s likely that not all of the economic loss will be recovered.

In addition to federal workers not being paid, low-income households not receiving benefits, and flights being cancelled, the shutdown also prevented the collection and release of key economic data. This includes data on Canada’s exports to the U.S. and the U.S. labour market. It’s unclear if the missing data will ever be available or exactly when we will start getting new data again.

Compared to the other disruptions caused by the shutdown, data loss is not a big deal, but it does mean, for example, the U.S. Federal Reserve will be making a decision on interest rates next month without a clear picture of what has been happening in the U.S. economy.

Given the many economic ties between Canada and the U.S., it’s good news that the shutdown is over. We could, however, be facing another one at the end of January unless U.S. lawmakers reach agreement on a number of thorny issues before then.

To peak or not to peak: IEA reignites discussion about peak oil

The phrase “peak oil” is used in different ways. Originally, it referred to predictions of when oil production in the U.S. will reach a maximum level after which it will start to irreversibly decline. This was later applied to global oil production.

Peak oil is also used to refer to oil consumption (a.k.a. demand) and this is how a new report from the International Energy Agency (IEA) uses it.

The report presents a number of scenarios and uses these to predict when global oil consumption will (or won’t) peak.

In the Current Policies Scenario (which considers “policies and regulations that are already in place and offers a cautious perspective on the speed at which new energy technologies are deployed and integrated into the energy system”), global oil consumption does not peak, but continues to grow out to 2050 (the end of the scenario’s time frame), reaching 113 million barrels per day (mb/d). Natural gas demand also does not peak.

In the Stated Policies Scenario (which considers “the application of a broader range of policies, including those that have been formally put forward but not yet adopted” and lower barriers to the introduction of new technologies), oil demand peaks at 102 mb/d around 2030 before gradually declining. Natural gas demand increases to 2035, then levels off.

Implications: In both of the above scenarios, significant new capital investment will be needed to meet the rising demand and lower production from existing oil fields. In terms of where the consumption growth will take place, “emerging market and developing economies in Asia, including China, are the destination for nearly 60% of the oil and gas exported globally in 2035 in both scenarios, up from 45% today.” The report also notes that the scenarios lead to a global temperature rise above pre-industrial levels of between 2.5 °C and 2.9 °C, which is above the levels targeted in the Paris Agreement. 

A third aspirational scenario called Net Zero Emissions by 2050 describes “a pathway to reduce global energy-related carbon dioxide emissions to net zero by 2050. In this scenario, global oil consumption falls dramatically by 2035 and keeps falling out to 2050 where it is 75% lower than today. As a result, emissions fall 55% by 2035 and cause global temperatures to rise by 1.6°C by 2050.  

Interesting Fact: Reversal of fortune - The Capline Pipeline

Originally built to move crude oil from the U.S. Gulf Coast to refineries in the Midwest, the direction of flow along the 1,000-km long Capline Pipeline was reversed in 2021. From 1968 to 2021, the oil flowed northward from Louisiana to Illinois. With a surplus of crude oil flowing into the Midwest, the pipeline underwent a reversal project such that, from December 2021 on, the oil has flowed southward from Illinois to Louisiana.

This change was tremendously important to Canada and Alberta because it meant that more Canadian barrels could get to the U.S. Gulf Coast for refining or further export. The pipeline currently operates with a light oil equivalent capacity of 417,000 barrels per day, but this could be expanded to more than 800,000 barrels per day.

Chart of the Week: Declining GDP per capita

We tend to talk about economic output and growth in terms of the gross domestic product (GDP) of a particular country, state/province, or city. By this measure, Russia’s economy is about the same size as Canada’s. But, when population size is factored in, Canada’s economy is almost four times larger per resident than Russia’s.

Per resident (a.k.a. per capita) GDP is also important when comparing Canada’s provincial economies and how they are, or aren’t, growing over time.

Zeroing in on Alberta, the latest official GDP estimates from Statistics Canada (released last week and covered in The Twenty-Four on Monday) show that real (i.e. adjusted for inflation) GDP per capita in the province has decreased two years in a row and remains below its pre-pandemic level.

GDP is not the only measure of economic prosperity, but it is an important one so it’s concerning that output per Albertan has fallen six times in the last ten years. A new report from the Centre for the Study of Living Standards that uses a much broader measure of economic well-being than GDP finds that it's actually worse than the GDP numbers suggest.

On a brighter front, Alberta’s GDP per capita is the highest of any province and was more than $15,000 higher than the national average in 2024. The last decade has, however, been hard on Alberta’s economic growth and the gap between Alberta’s real per capita output and the national average is the smallest it has been (outside the pandemic) since 1989.

Looking ahead, slower population growth will help push the change in Alberta’s real per capita GDP back into positive territory next year, albeit only slightly and only after another contraction in 2025. To really get growing again, Alberta will need to attract higher levels of business investment in both traditional areas of strength like energy and agriculture and across a wide range of sectors where it has momentum, including tech, aviation, logistics, tourism, and others.

Answer to the previous trivia question: Winnipeg is hosting the Grey Cup on Sunday.

Today’s trivia question: How many pages is the 2025 federal budget?