In the heart of the Canadian Shield, the Tenaris pipe mill in Sault Ste. Marie, Ont., has been running at record levels, thanks in large part to growing oil and gas production in Western Canada. 

In 2025, the factory reached its highest-ever output of seamless pipe in its 25-year history. 

And it’s on track to exceed that mark again in 2026, a milestone that reflects the company’s critical role in the steel town’s economy, as well as in Canada’s broader energy supply chain.

A worker checks steel pipe at the Tenaris manufacturing facility in Sault Ste. Marie, Ont. Photo courtesy Tenaris

Tenaris employs about 1,200 people nationwide, including roughly 800 in Sault Ste. Marie, manufacturing high-grade steel pipe that is shipped by rail to service centres in Alberta and British Columbia, where it supports oil and gas drilling and production.

“Our steel pipe manufacturing in the East allows oil and gas exploration to advance and flourish in the West,” says Jessica Tett, communications manager for Tenaris in Canada. 

“As the country strengthens its position as a global energy superpower, we are committed to powering that growth through our manufacturing, industrial expertise and support for Canada’s energy industry.”

As momentum builds around discussions of a new oil pipeline to Canada’s west coast, the country’s steel producers are sounding a clear, unified message: this isn’t just a project about energy transport — it’s a chance to strengthen Canada’s industrial core, support jobs and build supply chains that ensure national resilience.

Workers complete the “golden weld” signifying mechanical completion of the Trans Mountain Expansion project on April 11, 2024 in the Fraser Valley between Hope and Chilliwack, B.C. Photo courtesy Trans Mountain Corporation

Among other things, the recent energy agreement between Alberta and Canada to pursue a major new export pipeline to reach Asian markets commits both governments to develop Canadian steel and pipe production supply chains.

For steelmakers and manufacturers, the agreement signals a potential shift toward nation-building projects that prioritize Canadian materials, Canadian labour and Canadian expertise.

A cornerstone of Canada’s industrial economy

Tenaris’s experience reflects the broader importance of Canada’s steel industry, which is a cornerstone of the national economy and a critical supplier to energy, construction, transportation and manufacturing sectors. 

Tenaris employees work with pipe threading equipment at the company’s manufacturing facility in Sault Ste. Marie, Ont. Photo by Peter Power for the Canadian Energy Centre

Canada’s steel industry generates roughly $15 billion in annual output, directly employs about 23,000 people, and supports more than 100,000 additional jobs across related industries, according to the Canadian Steel Producers Association (CSPA).

Energy is one of the steel sector’s most important markets. 

The CSPA estimates oil and gas, wind towers and power generation together account for roughly 30 per cent of steel demand in Canada.

“We’re excited about it,” said François Desmarais, vice-president of trade and industry affairs at the CSPA, referring to the agreement and the prospect of a major new pipeline. 

“It’s a signal that we have an interest in the energy sector. It creates more certainty for our business.”

A worker looks on as crews build the Coastal GasLink pipeline in B.C. The project was completed in November 2023. Photo courtesy Coastal GasLink

Domestic supply in a volatile global market

Industry leaders say expanding Canadian energy infrastructure has become increasingly important as steel producers face mounting international trade pressures. 

The U.S. now charges a 50 per cent tariff on the first tonne of steel imported from any country, sweeping Canada into a broader move to deal with global steel oversupply.

“The net was too wide, and we got caught in it,” Desmarais said. 

“Many countries are trying to protect their national industries from surplus steel, particularly with China producing too much.”

Against that backdrop, building domestic demand through major energy projects could help offset lost export opportunities.

“We supply about 50 per cent of steel consumption in Canada,” Desmarais said. 

“There’s no reason why we can’t supply more.”

Steel pipe in storage for the Trans Mountain Expansion project in 2022. Photo courtesy Trans Mountain Corporation

Tenaris, which sells most of its Canadian-made production domestically, says it has less exposure to U.S. tariffs but strongly supports federal efforts to maintain a level playing field by countering unfairly traded imports.

“Made-in-Canada steel is critical to Canadian sovereignty in our energy supply chain,” Tett said.

Manufacturing ripple effects

The potential benefits of a west coast pipeline would extend well beyond steel mills. 

Canadian Manufacturers & Exporters (CME) says the energy agreement reflects a positive shift in how governments view Canada’s energy and industrial potential.

“Energy policy is manufacturing policy,” said Ryan Greer, CME’s senior vice-president of public affairs and national policy. 

“Canadian manufacturers will supply steel, fabricated metal, valves, pumps, electrical components, coatings, heavy equipment, control systems and more.”

An employee applies final adjustments on a new premium line at the Tenaris pipe manufacturing hub in Sault Ste. Marie, Ontario on October 31, 2022. Photo by Peter Power for Canadian Energy Centre

Greer said megaprojects have become increasingly important as Canadian manufacturers navigate tariff uncertainty and volatile trade relationships.

“While we hope Canada and the U.S. can get North American trade back on a more predictable trajectory, it has become clear that Canada must assertively try to generate jobs, growth and prosperity in ways that aren’t reliant on U.S. decision-making,” he said.

Becoming Canada’s own best customer

Steel producers say governments can maximize the economic benefits of a major pipeline by clearly identifying material needs early and prioritizing domestic procurement.

“Map out what the needs are or will be,” Desmarais said. “That allows companies to make the business case to retool if necessary.”

With billions already invested in Canadian facilities — including $255 million Tenaris has invested in Sault Ste. Marie, since 2020 — industry leaders say Canada is well-positioned to deliver.

The “Golden Weld” marked mechanical completion of the Trans Mountain Expansion project on April 11, 2024. Photo courtesy Trans Mountain Corporation

“Everybody is doing it — the U.S., Europe and others are looking out for their own industries,” Desmarais said. 

“Canada needs to do the same and become our own best customer.”

For companies like Tenaris, that approach would reinforce a truly national supply chain — one that starts in Ontario steel mills and ends at energy projects powering Canada’s economic future.

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From his desk in Marathon, Ont., a small community on the north shore of Lake Superior, Mayor Rick Dumas sees the concept of an energy corridor to Western Canada’s oil and gas as a chance to reshape his region’s future.

The Ontario government issued a request for proposals on August 7 for a feasibility study into the idea, which would move energy products from across the Prairies and Northern Ontario to consumers and exporters in the East. 

Rick Dumas, Mayor of Marathon, Ontario.

“Projects like the East-West Energy Corridor are exactly what Northwestern Ontario has been calling for — an opportunity to be at the forefront of a nation-building initiative,” said Dumas, who is also president of the Northwestern Ontario Municipal Association, representing the districts of Kenora, Rainy River and Thunder Bay. 

“It means new jobs, greater economic opportunity, and a real commitment to building a cleaner, stronger, and more resilient country together.”

The feasibility study will map potential pipeline routes linking Alberta to Southern Ontario’s refining sector and new tidewater ports, including on James Bay, Hudson Bay and the Great Lakes. 

It will also assess the construction or expansion of a refinery, examine Indigenous equity opportunities, and even explore the creation of a Canadian strategic petroleum reserve.

Support for the corridor also comes from Southern Ontario, where the region’s petrochemical and energy industries depend on oil and gas supplies delivered by a pipeline that crosses Michigan.

“We believe this represents an opportunity to achieve both energy security for Ontario and Canada, and economic growth and diversification potential,” said Matthew Slotwinski, CEO of the Sarnia-Lambton Economic Partnership. 

“Long-term, reliable and secure feedstock supply is necessary for the sustained success and potential growth of our current operations.” 

The Sarnia-Lambton region is home to Ontario’s largest concentration of energy infrastructure, including refineries, chemical plants, power generators, and Enbridge Gas’s Dawn Hub, where much of the province’s natural gas supply is gathered for commercial distribution. 

The region is also exploring new opportunities in liquefied natural gas (LNG), hydrogen, and alternative fuels.

“Very few of Ontario’s cars would drive, flights would fly, or homes would be heated without the products that originate from the Sarnia-Lambton energy and chemistry complex,” Slotwinski said.

“Our industry leaders need to be front and centre in identifying how they can be harnessed as part of any nation-building exercise.” 

Labour groups are also throwing their weight behind the energy corridor initiative, pointing out that Michigan’s governor wants to shut down the pipeline that carries Canadian oil and gas through its borders. 

Mike Gallagher, business manager of the International Union of Operating Engineers (IUOE) Local 793, told CBC that he supports the corridor as a source of jobs and independence.

“As far as I’m concerned, the sooner this gets done, the better,” he said. 

“A new pipeline would not only create jobs, it would strengthen our country’s independence and is exactly the kind of nation-building project that Prime Minister Carney promised to deliver.”

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Despite Canada’s status as one of the world’s largest oil and gas producers, more than half of the country’s own population does not have true energy security – uninterrupted, reliable access to the energy they need at an affordable price.

Even though Western Canada produces much of the oil consumed in Ontario and Quebec, in order to get there, it moves on pipelines that run through the United States.

“It’s only energy secure if the Americans are our partners and friends,” leading energy researcher Jackie Forrest said on a recent episode of the ARC Energy Ideas podcast.

Amid rising trade tensions with the United States, energy security is taking on greater importance. But Forrest said the issue is not well understood across Canada.

“The concern is that in the worst-case scenario where the Americans want to really hurt our country, they have the ability to stop all crude oil flows to Ontario,” she said.

That action would also cut off the majority of oil supply to Quebec.

The issue isn’t much better for natural gas, with about half of consumption in Ontario and Quebec supplied by producers in the U.S.

“Tariffs or no tariffs, there is a real vulnerability there,” said Forrest’s co-host Peter Tertzakian, founder of the ARC Energy Research Institute.

The issue won’t go away with increased use of new technology like electric cars, he said.

“This isn’t just about combustion in engines. It’s about securing a vital commodity that is an input into other parts of our manufacturing and sophisticated economy.”

Oil: The Enbridge Mainline

The Enbridge Mainline is the main path for oil from Western Canada to reach refineries in Ontario and Quebec, according to the Canadian Association of Petroleum Producers (CAPP).

Originally built in 1950 from Edmonton to Superior, Wisconsin, in 1953, it was extended to Sarnia, Ontario through a segment known as Line 5.

CAPP said that at the time, politicians had pushed for an all-Canadian path north of the Great Lakes to increase energy security, but routes through the U.S. were chosen because of lower project costs and faster timelines.

In 1979, an extension of the pipeline called Line 9 opened, allowing oil to flow east from Sarnia to Montreal.

“Line 9 was built after the oil crisis and the OPEC embargo as a way to bring western Canadian crude oil into Quebec,” Forrest said.

But by the 1990s – before the massive growth in Alberta’s oil sands – there was a lack of crude coming from Western Canada. It became more economically attractive for refineries in Quebec and Ontario to import oil from overseas via the St. Lawrence River, CAPP said.

A reversal in 1999 allowed crude in Line 9 to flow west from Montreal to Sarnia.    

By the 2010s, the situation had changed again, with production from the Alberta oil sands and U.S. shale plays surging. With more of that oil available, the offshore crude was deemed to be more expensive, Forrest said.

In 2015, Line 9 was reversed to send oil east again from Sarnia to Montreal, displacing oil from overseas but not resolving the energy security risk of Canadian pipelines running through the U.S.

CAPP said the case of Line 5 illustrates this risk. In 2020, the Governor of Michigan attempted to shut down the pipeline over concerns about pipeline leak or potential oil spill in a seven-kilometre stretch under the Straits of Mackinac.

Line 5 has been operating in the Straits for 72 years without a single release.

Enbridge is advancing a project to encase the pipeline in a protective tunnel in the rock beneath the lakebed, but the legal battle with the State of Michigan remains ongoing.

Natural gas: The TC Canadian Mainline

The natural gas pipeline now known as TC Energy’s Canadian Mainline from Alberta was first built in 1958.

“This pipeline brought gas into Ontario, and then it was extended to go into Quebec, and that was good for a long time,” Forrest said.

“But over time we built more pipelines into the United States, and it was a better economic path to go through the United States.”

The Mainline started running not at its full capacity, which caused tolls to go up and made it less and less attractive compared to U.S. options.

According to CAPP, between 2006 and 2023 the Mainline’s deliveries of gas from Western Canada to Ontario and Quebec were slashed in half.

“We should have said, ‘We need to find a way for this pipeline, over our own soil, to be competitive with the alternative’. But we didn’t,” Forrest said.

“Instead, we lost market share in Eastern Canada. And today we’re in a big bind, because if the Americans were to cut off our natural gas, we wouldn’t have enough natural gas into Quebec and Ontario.”

A different approach for a new reality

Forrest said the TC Mainline, which continues to operate at about half of its capacity, presents an opportunity to reduce Canada’s reliance on U.S. natural gas while at the same time building energy security for oil.    

“Those are the same pipes that were going to be repurposed for oil, for Energy East,” Tertzakian said.

“The beauty of the thing is that actually, I don’t think it would take that long if we had the will… It’s doable that we can be energy secure.”

This could come at a higher cost but provide greater value over the long term.

“That’s always been the issue in Canada, when it comes to energy, we always go with the cheapest option and not the most energy secure,” Forrest said.

“And why? Because we always trusted our American neighbor to never do anything that will impact the flow of that energy. And I think we’re waking up to a new reality.”

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After more than five years of development, a $2 billion petrochemical expansion is starting up near Sarnia, Ontario.  

The project shows how important industry is to thousands of people in the region, and it’s an example of the kind of major project residents fear could be lost in the federal government’s Just Transition, says Sarnia Mayor Mike Bradley.  

“When the trades work in Sarnia, the community works. Every aspect of the business community gets a positive impact,” he says.  

“For two or three years, all the trades here were working, which is a huge impact. The hope is that out of that plant, other auxiliary operations will come.”   

Calgary-based NOVA Chemicals is the largest private employer in the Sarnia-Lambton region. Late last year the company completed construction of a new polyethylene facility and ethylene cracker expansion.  

Derived from natural gas, polyethylene is used in numerous plastic products from food packaging and liners to truck mud guards, kayaks and canoes.

NOVA’s expansion increases its polyethylene production capacity in the region by more than 75 per cent, to about 2.6 billion pounds per year.     

Construction involved more than 7,000 workers and created 150 permanent full-time jobs, the company says. That’s not unusual for the Sarnia region, says Bradley.  

“In a city of 75,000 to 80,000, we have 5,000 construction workers who are constantly upgrading the plants and building new ones,” he says.  

“Just like in Alberta, they have good paying jobs connected to the industry. They’re very concerned and that gets overlooked. At the other end of the pipeline, we’re partners on this.” 

In addition to jobs in energy, agriculture and transportation, the federal government’s Just Transition plan to reduce emissions is expected to cause “significant labour market disruptions” in building trades and manufacturing.  

“The industry itself is not, I believe, understood by governments for its added value to what it does,” Bradley says.  

“You couldn’t make a car in this country without petrochemicals. You simply can’t. And in Sarnia we not only manufacture the gasoline, we make the carbon black for the tires, [and] we make the plastics. So if anyone talks about rushing ahead, they should take a good look at what would be lost.” 

The Sarnia region is adopting new energy and technology, he says, through initiatives like the Bioindustrial Innovation Centre, an industrial cleantech accelerator. And local government is “pushing hard” to attract large hydrogen facilities.    

“We’ve been designated as a hydrogen hub because we make it here and we have all the things to do it, and I know Alberta is moving in the same direction,” Bradley says.  

“We’re not standing back and saying don’t change anything,” he says.

“Don’t rush this, do this right. And do it based on science. Don’t do it based on politics.” 

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Global steel pipe manufacturer Tenaris has completed a $150-million project to centralize its operations in Canada under one roof in Sault Ste. Marie, Ontario.

It’s an important investment from a key player in the supply chain that supports oil and gas development across the country.

Ontario’s Independent Electricity System Operator (IESO) is recommending the province step-up natural gas use to help avoid an energy shortage. 

Ontario will require an additional 4,000 MW of electricity between 2025 and 2027 – the equivalent of adding a city the size of Toronto to the power grid, said the Crown corporation in a recent report, noting there is no “like-for-like” replacement for natural gas. 

As power demand grows across Canada, provinces must decide between various energy sources, including facing pressure to eliminate gas altogether from the grid, according to RBC Economics and Thought Leadership. 

“If they get it wrong, Canada could suffer Europe’s fate of a hobbled, energy-insecure grid that leaves consumers with soaring bills,” analysts wrote in September.  

Keeping costs down and power reliable 

After a foray into renewables starting in 2009 that sent Ontario energy prices skyrocketing up to 75 per cent higher than competing jurisdictions in North America, the province is now planning new natural gas infrastructure to help meet energy demand. 

“Natural gas provides Ontario’s electricity system with flexibility, reliability and security as other non-emitting forms of electricity supply is developed,” said the IESO. 

Currently, there are approximately 3.6 million homes and 160,000 businesses in Ontario using natural gas.  

The IESO is recommending several options to increase power supply including 2,500 MW of storage, hybrid, biofuels, and 1,500 MW of natural gas. 

The province says it is expanding natural gas access across rural, northern and Indigenous communities “to help keep the cost of energy low for thousands of families, businesses and farmers.”   

Support from First Nations 

Anwaatin, an Ontario-based Indigenous climate change action group, came out in support of the province’s natural gas expansion. In a letter to the Ontario Energy Board, they said many First Nations struggle with energy poverty. 

“The majority of First Nations in Ontario do not have access to natural gas and rely on electricity with poor to modest reliability in the north for basic home heating as well as lighting,” said Anwaatin.  

“Many First Nations are therefore interested in accessing lower-cost natural gas in order to allow for energy cost savings and lower-emission heating when compared to other fossil fuels.” 

Mixed messages 

Questions remain about Ontario’s natural gas expansion. Over 30 Ontario municipalities have declared their intention to reduce or eliminate fossil fuel use, said Catherine Swift, an economist and president of the Coalition of Concerned Manufacturers and Businesses of Canada.  

“I’ve asked some of these councillors, at times, how do you think this is going to happen?” she said. “How are you going to replace this? There’s no plan.” 

Meanwhile, the City of Ottawa wants to eliminate all greenhouse gas emissions – city wide – by 2050, a plan that would cost taxpayers over $50 billion, said Swift, noting property taxes would skyrocket if the idea came to fruition.  

There are contradictory statements and mixed messages circulating in Ontario’s political ether, she said, noting nuclear power is still part of the conversation. 

“But the green activists don’t like nuclear energy either, right?” she said.  

A lesson for the country 

Given Ontario’s energy problems, is Canada ready for an expected 50 per cent increase in electricity consumption over the next decade? 

“It’s a tall order, even unlikely at our current pace of decision-making,” said RBC Economics and Thought Leadership.  

“Add to it another complexity: we have committed to a net zero grid by 2035, yet natural gas continues to make a compelling economic and reliability argument.” 

Dan McTeague, president of Canadians for Affordable Energy, agreed with RBC, saying Canada may end up like Europe if the right policy measures aren’t adopted. 

“You will never address that until this country starts to pump more oil and get more natural gas to a world that desperately needs it,” he said. 

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Canada’s oil and gas industry is often considered to be an Alberta story, but some of its biggest benefactors and advocates are in Ontario.

People like Rory Ring, CEO of the chamber of commerce in Sault Ste. Marie.

Ring has described Canada’s oil and gas industry as a pebble in the pond that reflects and echoes right through the economy. It’s a sector he’s proud of and wants more Canadians to understand why.

“Canada leads the way in responsible resource development and demand for oil and gas is increasing. We need to educate Canadians and the world about the products that are made from oil and gas and how every facet of our lives depends on these products,” Ring says.

In Ontario in particular, oil and gas benefits people’s daily lives.

According to new CEC research, oil and gas supported 71,000 direct and indirect jobs in Ontario in 2017, and paid $2.1 billion in workers’ income. The sector added $7.7 billion in nominal GDP to the province’s economy, and purchased $7.3 billion worth of goods and services from other industries including over $4.3 billion from manufacturing businesses.

Manufacturing in Ontario is highly inter-connected to Canada’s oil and gas industry. Not only do Ontario manufacturers use Canadian-produced oil and gas in their operations, they also manufacture parts and finished products that are used in the oil and gas industry.

One example is Tenaris, a global steel pipe producer with a mill in Sault Ste. Marie. The company has a $117-million project underway to upgrade its facility to better serve the domestic energy industry by offering Canadian oil and gas customers longer welded pipes to improve the efficiency of their operations.

Toronto-based Automatic Coating Limited (ACL) is another Ontario company working closely with oil and gas. ACL provides powder and liquid coating services that help the industry reduce greenhouse gas emissions, according to vice-president Jocelyn Bamford.

“ACL digs up old pipelines, takes off the old paint, and then puts on the new paint. We decrease three pieces of equipment to one piece of equipment and reduce our GHGs by two-thirds,” she says.

“The development process to strip old pipelines with no emissions is a new technology that is very environmentally friendly.”

Canada’s oil and gas industry benefits from innovation by Ontario businesses, while Ontario businesses benefit from the trade of goods and services as well as reliable supply of the energy itself.

Manufacturers use oil and natural gas to heat their facilities and office buildings, as well as to heat water. Natural gas and diesel fuels are used to power machinery and fleet vehicles that are used to transport goods across Ontario, Canada and eventually to be exported globally.

“Sault Ste. Marie’s business community relies heavily on oil, gas and diesel because electrification is very difficult to use in the northern part of Ontario and many manufacturers in the area manufacture parts and finished products for Canada’s oil and gas industry,” Ring says.

Bamford, who is also president of the Coalition of Concerned Manufacturers and Businesses of Canada, says members prefer to use oil and gas for their operations because the infrastructure already exists and the energy is affordable.

“We need affordable energy to remain competitive,” she says.

Both Bamford and Ring argue that oil and gas-related manufacturers and businesses in Ontario generate government revenues that support infrastructure investments like new roads and bridges, as well as sponsoring community events, building sports facilities, and making donations and endowments to educational institutions.

Today’s benefits have evolved to include strong partnerships with educational institutions for skills training and upgrading, and joint ventures with Indigenous communities, Ring says.

“We need to communicate that Canada’s oil and gas industry is one of the most responsibly developed, heavily-regulated industries in the world that produces oil and gas under strict environmental policies, labour and human rights laws,” he says.

“Canada’s oil and gas industry is also a leader in energy technology innovation which contributes to fighting climate change.”

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The headline screamed: “The end of oil age” in the Economist in 2003. Fast forward 18 years and that still doesn’t make sense in many ways. The demand for oil is increasing across the globe. Even U.S. President Joe Biden is now asking OPEC to produce more oil.

You don’t have to go far to fill your gas tank to see the rise in fuel prices in recent months. Who says oil is dead? Just look at the growing global disconnect between supply and demand, where the need for natural gas threatens all sorts of shortages.

Many environmental groups have been calling for divestment from oil and gas. Yet, they ignore the realities on the ground. Divestment from oil and gas harms not only the many energy companies that are creating jobs in the economy but also investors, such as the middle-class and seniors, and other value chain sectors that depend on oil and gas.

Let’s look at Ontario, as a prime example.

Many Canadians may not be aware that the first commercial oil production in North America started in Ontario in 1858. Since then, the oil and gas sector has played a significant role in the provincial economy. Though Ontario is not a major producer of oil and gas, there are still some 3,000 oil and gas wells active in the province.

There are many ways that the oil and gas sector benefits the Ontario economy, in addition to reliable energy supply. Thousand of kilometres of pipelines in Ontario move oil and gas to the U.S., creating many jobs in Ontario. The refining industry also creates employment and contributes to the provincial economy. And many value chain sectors in Ontario supply goods and services to oil and gas companies.

Looking at the most recent (2017) comprehensive data available from Statistics Canada, it turns out that the oil and natural gas industry was responsible for adding $7.7 billion in nominal GDP to Ontario’s economy, and over 71,000 jobs. Many of these jobs are indirect, but just as critical to the oil and gas sector.

Think of oil and natural gas employment in Ontario as engineers and manufacturers hired to design and build oil and gas operating equipment and facilities, a building in Edmonton or in downtown Toronto, or an investment firm tasked with raising capital for a natural gas company operating in northern Alberta or B.C. Also think of an Alberta oil sands company whose local spending on office furniture results in jobs created in the Ontario firm that produces that furniture.

In 2017, the oil and gas industry purchased $7.3 billion worth of goods and services in Ontario, including $4.3 billion from Ontario’s manufacturing sector alone. Other “big ticket” purchases include $700 million from the Ontario finance and insurance sector, $600 million from the professional, scientific and technical services sector, and $300 million from transportation and warehousing. Overall, $2.1 billion in salaries and wages were generated as the result of oil and gas industry spending in Ontario.

Beyond the impact of the oil and gas sector, let’s widen the look at Alberta’s impact on Ontario’s economy. In 2017, Alberta’s population was 11.6 percent of the national total, while Alberta’s share of purchases from Ontario’s manufacturing sector was 21 percent of Ontario’s total interprovincial trade in manufacturing. That is nearly twice Alberta’s share of Canada’s population. In fact, Alberta’s consumers, businesses, and governments were responsible for neatly 24 percent, or $32.5 billion, of Ontario’s total interprovincial trade in 2017. This was second only to Ontario’s next-door neighbour, Quebec.

Now consider Alberta’s share of Ontario’s interprovincial and export trade and how it compares to selected countries. Alberta’s $32.5 billion in purchases from Ontario in 2017 was behind only the United States ($197 billion), but ahead of the United Kingdom ($14.7 billion), China ($3.4 billion), Mexico ($3.2 billion), and Germany ($1.9 billion), among others. Add up the goods and services purchased by Alberta consumers, businesses, and governments from Ontario firms between 2012 and 2017, and the total value was about $193 billion.

Economies may be locally based, but local businesses and jobs are impacted by investment and trade flows from other places. Whenever someone says that oil and gas doesn’t matter to Ontario, tell them to look at the “on the ground” realities. From Bay Street to Yonge Street to Main Street, people living across Ontario benefit from a thriving oil and gas sector.

Ven Venkatachalam and Lennie Kaplan are with the Canadian Energy Centre, an Alberta government corporation funded by carbon taxes. They are authors of $193 billion and 71,000 jobs: The Impact of Oil and Gas (and Alberta) on Ontario’s Economy.    

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Overview

Canada’s oil and gas industry has a positive impact on many sectors of the Canadian economy, not only in Alberta but across the country. In this CEC Fact Sheet, we examine the direct and indirect impact that the oil and gas sector has on Ontario’s economy¹.

Given that the largest proportion of oil and gas activity in Canada occurs in Alberta, we also profile the impact of purchases from Alberta on specific Ontario sectors.

Impact of the oil and gas sector on Ontario

Using customized data from Statistics Canada²(see Table 1), in 2017³ the oil and gas sector:  

• Was responsible for adding $7.7 billion in nominal GDP to Ontario’s economy;
• Generated $15.3 billion in outputs, consisting primarily of the value of goods and services produced by oil and gas sector in the Ontario economy;
• Supported over 71,000 direct and indirect jobs in Ontario’s economy; and
• Paid over $2.1 billion in wages and salaries to workers in Ontario.

1. The direct impact is measured in terms of GDP, output, and jobs within the oil and gas sector. The indirect impact is measured in terms of GDP, output, and jobs through the oil and gas sector supply chain, including other key sectors of the Ontario economy. See the end of this Fact Sheet for entities included in the definition of the oil and gas sector.
2. For a discussion of Statistics Canada’s use of input/output models and equilibrium models, see the addendum in Fact Sheet #17. 
3. The latest year for which there is available data. 3. Electricity is produced as a primary or secondary product in power plants. The total amount of electricity produced is referred to as gross electricity production.

Source: Derived from Statistics Canada, Supply and Use Tables, custom tabulation.

Quantifying the contribution of the oil and gas sector to Ontario’s economy

To examine the impact of the oil and gas sector on Ontario’s economy in more detail, consider that in 2017 (the most recent year of data available for this breakdown), the oil and gas sector purchased $7.3 billion worth of goods and services from other industries in Ontario. That $7.3 billion included:
• Over $4.3 billion from the manufacturing sector;
• $700 million from the finance and insurance sector;
• $600 million from the professional, scientific, and technical services sector;
• $400 from administrative support; and
• $300 million from the transportation and warehousing sector.

Alberta: Ontario’s second-largest destination for interprovincial trade

Alberta is second only to Quebec as a critical market for Ontario’s interprovincial exports (see Table 2 and Addendum 2). Ontario’s trade with Alberta was worth $32.5 billion in 2017, or 23.9% of all Ontario interprovincial trade, second only to Quebec at $44.7 billion or 32.9%.

Alberta’s share of Ontario’s interprovincial trade: $32.5 billion or nearly 24%

In 2017, Alberta’s share of Ontario’s interprovincial trade (beyond just manufacturing) was worth $32.5 billion or 23.9% of all exports from Ontario that year (see Figure 1). The value of Alberta’s purchases to Ontario ranged from $100 million in the mining, quarrying, and oil and gas extraction sector (4.2% of that sector) to nearly $8.2 billion in finance and insurance (over 30% of that sector).

Source: Statistics Canada, Table 12-10-0088-01

Analyzing Alberta’s purchasing impact on Ontario manufacturers: $7.0 billion or almost 21% of Ontario’s manufacturing exports to all provinces

In 2017, purchases from Ontario’s manufacturing sector by Alberta businesses (21% of total Ontario manufacturing exports), were significantly higher than Alberta’s proportion of Canada’s population at 11.6% (see Figure 1).

In dollar terms, Albertans made substantial purchases from Ontario in 2017, from $9 million in computers and electronics to over $2 billion in food and non-alcoholic beverages. As a proportion of Ontario’s manufacturing sub-sectors, Alberta’s purchases ranged from 7% for wood, pulp, and paper, to 19% for furniture, to 27% for refined petroleum products. Alberta-based consumers, businesses, and governments made an average of nearly 24% of purchases from all sectors in Ontario.

Sources: Statistics Canada, Table 12-10-0088-01; Table: 17-10-0005-01.

2012-2017 total: $193 billion

Ontario has benefited from the growth in Alberta’s oil and gas sector and the purchase of goods and services from Ontario by Alberta-based residents, businesses, and governments. Between 2012 and 2017 inclusive, Alberta imported $193 billion worth of goods and services from Ontario. Among other sectors, this includes:

• More than $50 billion from the manufacturing sector;⁴
• $46.8 billion from the finance and insurance industry;
• $21.6 billion from the professional services sector; and
• $9.4 billion from the information and culture industry.

The top 5 Ontario sectors sold $159 billion worth of goods and services into Alberta between 2012 and 2017 inclusive (see Figure 2).

4. Includes food and non-alcoholic beverages; alcoholic beverages and tobacco products; textile products, clothing, and products of leather and similar materials; wood products; wood pulp, paper, paper products, and paper stock; printed products and services; refined petroleum products (except petrochemicals); chemical products; plastic and rubber products; nonmetal mineral products; primary metal products; fabricated metal products; industrial machinery; computers and electronic products; electrical equipment, appliances and components; transportation equipment; motor vehicle parts; furniture and related products; other manufactured products.

Alberta is Ontario’s third largest export market after the United States and Quebec

Ontario’s interprovincial trade with Alberta was worth $32.5 billion in 2017. That was behind only the United States (over $197 billion) and Quebec ($44.7 billion) and ahead of international markets such as the United Kingdom ($14.7 billion), China ($3.4 billion), and Mexico ($3.2 billion) among others (see Table 3).

Source: Government of Canada, trade data online, and authors’ calculation derived from
Statistics Canada Table: 12-10-0088-01.

Alberta and Ontario’s manufactured goods

In 2017, Ontario’s manufacturing sector exported about $9.3 billion worth of goods and services to Alberta, about 21% of the industry’s total value of interprovincial trade (see Table 4). That was significantly less than Ontario’s exports to the United States (over $168 billion), but ahead of international destinations for Ontario’s manufactured exports including Mexico ($3.2 billion), the United Kingdom ($2.6 billion), China ($2.4 billion) and Germany ($1.7 billion), among others.

Source: Government of Canada, trade data online, and authors’ calculation derived from
Statistics Canada Table 12-10-0088-01.

The takeaway

The oil and gas sector in Canada has a significant impact on Ontario’s export sectors, directly and indirectly, as does the purchase of goods and services by citizens, businesses, and governments in the province where the oil and gas sector is concentrated, i.e., by those in Alberta.

Addendums

Source: Authors’ calculation from Statistics Canada Catalogue No. 15-602-X-2017.

Source: Authors’ calculations from Statistics Canada Table 12-10-0088-01.

Notes

This CEC Fact Sheet was compiled by Ven Venkatachalam at the Canadian Energy Centre (www.canadianenergycentre.ca) and Mark Milke, formerly of the Canadian Energy Centre. All percentages in this report are calculated from the original data, which can run to multiple decimal points. They are not calculated using the rounded figures that may appear in charts and in the text, which are more reader friendly. Thus, calculations made from the rounded figures (and not the more precise source data) will differ from the more statistically precise percentages we arrive at using source data. The authors and the Canadian Energy Centre would like to thank and acknowledge the assistance of Philip Cross in reviewing the data and research for the initial edition of this Fact Sheet. Image credits: Marcin Skalij from Unsplash.com

References (All links live as of October 18, 2021)

Statistics Canada (2020), Supply and Use Tables, 2017: 15-602-X_2017 <https://bit.ly/2XHbDUe>; Statistics Canada (2021a), Supply and Use Tables, custom tabulation; Statistics Canada (2021b), Table 17-10-0057-01: Projected population, by projection scenario, age and sex, as of July <https://bit.ly/2W8bzfN>; Statistics Canada (2021c), Table 12-10-0088-01: Interprovincial and international trade flows, basic prices, summary level <https://bit.ly/3EN0aTR>; The American Petroleum Institute (July 2017), Impact of the Natural Gas and Oil Industry on the US Economy in 2015 <https://bit.ly/2EKrJTT>; Government of Canada, Trade Data Online (October 2021) <https://bit.ly/2EMswnj>.

Definitions

The oil and gas sector is defined as the sum of oil and gas extraction and oil and gas investment. Oil and gas extraction is defined by NAICS subsector 211. It comprises establishments primarily engaged in operating oil and gas field properties. Such activities may include exploration for crude petroleum and natural gas; drilling, completing, and equipping wells; and all other activities in the preparation of oil and gas up to the point of shipment from the producing property. This subsector includes the production of oil, the mining and extraction of oil from oil shale and oil sands, and the production of gas and hydrocarbon liquids through gasification. Oil and gas investment includes capital expenditures on construction, machinery and equipment, and exploration by the oil and gas extraction industry. GDP, or Gross Domestic Product, also referred to as gross value added at basic prices, is the sum of the market values, or prices, of all final goods and services produced in an economy. Output consists primarily of the value of goods and services produced by an industry. Jobs include employee jobs (full-time, part-time, and seasonal) and self-employed jobs. The direct impact of oil and gas extraction is the effects directly attributed to the industry’s production. The direct impact of oil and gas investment is the deliveries by domestic industries to satisfy capital expenditures by the oil and gas extraction industry. Direct impact is measured in terms of GDP, output, and jobs within the oil and gas sector. The indirect impact covers upstream economic activities associated with supplying intermediate inputs (the current expenditures on goods and services used in the production process) to the directly affected industries. The indirect impact is measured in terms of GDP, output, and jobs through the oil and gas sector supply chain, including other key sectors of an economy—in the case of this paper, Ontario’s economy. We use the American Petroleum Institute definition of the oil and natural gas sector to quantify the goods and services purchased by the sector and the wages paid by the sector. The sector includes conventional oil and gas extraction and nonconventional oil extraction. Support activities for oil and gas extraction include oil and gas engineering construction, petroleum refineries, petroleum and coal product manufacturing (except petroleum refineries); petroleum product wholesaler-distributors, gasoline stations, crude oil and other pipeline transportation, and pipeline transportation of natural gas. The manufacturing sector includes food and non-alcoholic beverages; alcoholic beverages and tobacco products; textile products, clothing, and products of leather and similar materials; wood products; wood pulp, paper, paper products, and paper stock; printed products and services; refined petroleum products (except petrochemicals); chemical products; plastic and rubber products; non-metal mineral products; primary metal products; fabricated metal products; industrial machinery; computers and electronic products; electrical equipment, appliances, and components; transportation equipment; motor vehicle parts; furniture and related products; and other manufactured products.

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