For the past several weeks, ATB Economics and the Studio.Energy team have explored why Canada’s GDP growth has felt more like an illusion in recent years. We found that Canada’s economic growth, on a per capita basis, has been consumption-driven over the past decade, and that the next leg of growth will need to be driven by investment and exports.

Our next goal was to find out how building 1.5 million barrels per day (b/d) of pipeline capacity could address this structural growth problem. But there was another practical purpose to the exercise. As part of our forecast process, we needed to quantify the upside if proposed pipeline projects proceed. As such, we partnered with Peter Tertzakian and the Studio team to leverage their specialized expertise in energy investment and production flows. They have the inputs we need, we have the macroeconomic models and forecasting expertise. A perfect match.  

In today’s Twenty-Four, we dive into the results of this exercise: The GDP Payoff of Additional Oil Pipeline Capacity. We find that additional pipeline capacity of 1.5 million b/d could contribute an average of $31.4 billion to Canada’s real GDP (in $2017) annually between 2027 and 2035 (or about 1.1%). The peak impact on real GDP is $39.7 billion, or 1.4%, in 2033. Importantly, this is not a population-driven increase: there are near-equivalent percentage gains in GDP per person. Economic impacts are felt across the country, but are concentrated in Alberta and B.C. where it is assumed that the investment takes place.

Investment today, exports tomorrow

Infrastructure projects provide a surge in economic activity during construction, but the true impact is the long-term productive capacity they create. To measure the scale, consider the capital required: building the pipelines is estimated to require cumulative construction spending of $41 billion, but filling them with oil requires an additional $100+ billion in upstream investment. We also assume that Pathway’s carbon capture and storage project proceeds at an estimated $20 billion as a pre-condition for the West Coast pipeline.

This creates a two-stage economic lift:

• The construction phase: Near-term growth is driven by spending on labour, engineering, steel, and services across the supply chain. During this phase, some spending leaks abroad for imported goods like specialized machinery, which means the net export contribution to GDP is initially negative.
• The operational phase: Once the infrastructure is online and the pipeline is full, the contribution shifts toward exports. By 2038, real oil and gas exports are estimated to be roughly 30% higher than the baseline, reflecting improved access to global markets.  

Jobs: The ripple effect

The impact of infrastructure investment on the Canadian workforce is substantial and extends far beyond the energy sector itself. Our analysis indicates that investment would support an average of roughly 112,000 additional jobs across Canada during the 2027 to 2035 period. The employment impact is expected to peak at 136,100 jobs in 2031 during the height of construction activity.

Notably, the jobs created are not limited to the energy sector; major infrastructure projects generate demand across a wide range of industries, including engineering and construction services, manufacturing, transportation, equipment supply, finance, and professional services.

Building longevity

In an increasingly competitive global landscape, countries that underinvest in productive capacity resign themselves to being price takers. Expanding Canada’s energy export capacity can diversify markets, improve the price Canada receives on its exports, strengthen resilience to economic coercion, support allied energy security, and boost GDP. 

This study looked at oil pipelines, but there is a much broader message. Whether it is energy, minerals, or agricultural goods, the key takeaway is that investing in the capacity to reach global markets is how Canada will strengthen its economic resilience, support its allies, and secure its future prosperity. 

Interested in learning more? I also joined the ARC Energy podcast earlier this week to explore the historical drivers of GDP and what expanded export capacity could mean for Canada’s economy with Peter Tertzakian and Jackie Forrest, which you can listen to here.

Answer to the previous trivia question: The last time the Bank of Canada’s policy interest rate (a.k.a. target for the overnight rate) was over 5% was March 5, 2001 when it was 5.5%.

Today’s trivia question: According to the The GDP Payoff of Additional Oil Pipeline Capacity report, in what year does the peak impact on Canada’s real GDP reach $39.7 billion, representing a 1.4% increase over the baseline?