Last week, Sonya Savage, Alberta’s energy minister, sent out a tweet in which she claimed that the oil and gas sector is the largest industry in Alberta.
It wasn’t clear what she meant by “largest”—number of employees? amount of tax revenue generated?
Well, I already discovered that oil and gas doesn’t employ the most employees. I also found that they don’t produce the most government revenue. So then I wondered if she was referring to gross domestic product.
Otherwise known as GDP, it’s the value of all the finished goods and services produced within a specific timeframe.
For example, Alberta’s GDP for 2019 was $337.15 billion. That means that if you add up all the goods and services produced last year in Alberta, it comes out to over $337 billion.
Here’s a breakdown by sector:
|Mining, quarrying, and oil and gas extraction||$87.88|
|Real estate and rental and leasing||$34.82|
|Health care and social assistance||$19.24|
|Professional, scientific and technical services||$16.52|
|Transportation and warehousing||$16.03|
|Finance and insurance||$13.14|
|Administrative and support, waste management and remediation services||$8.33|
|Information and cultural industries||$7.52|
|Accommodation and food services||$6.92|
|Other services (except public administration)||$6.36|
|Agriculture, forestry, fishing and hunting||$6.22|
|Arts, entertainment and recreation||$1.80|
|Management of companies and enterprises||$1.65|
Clearly, mining, quarrying, and oil and gas extraction (I’m just going to abbreviate it to oil and gas from now on since the vast majority of the sector is oil and gas, and it takes less time for my arthritic fingers to type) produced more than any other single sector of Alberta’s economy last year.
And nearly $90 billion is a good chunk of change, to be sure. I wonder what percentage of the total GDP that is.
|Mining, quarrying, and oil and gas extraction||26.07%|
|Real estate and rental and leasing||10.33%|
|Health care and social assistance||5.71%|
|Professional, scientific and technical services||4.90%|
|Transportation and warehousing||4.75%|
|Finance and insurance||3.90%|
|Administrative and support, waste management and remediation services||2.47%|
|Information and cultural industries||2.23%|
|Accommodation and food services||2.05%|
|Other services (except public administration)||1.89%|
|Agriculture, forestry, fishing and hunting||1.84%|
|Arts, entertainment and recreation||0.54%|
|Management of companies and enterprises||0.49%|
So, yeah, $87.88 billion does seem a lot. But $248.30 billion seems like more. That’s what the other sectors combined created.
Sonya’s right. Oil and gas is technically our largest single economic sector. But the majority of our economic production is outside oil and gas. Like, the rest of the economy outputs roughly 3 times as much as oil and gas does.
I wonder if it’s always been like this. After all, we still haven’t recovered fully from the 2015 recession. So, I found a dataset going back to 1997, and here’s what it looks like charted.
Yep. Oil and gas seems to have been the single largest sector of the economy for decades. And it’s GDP keeps growing, too, which seems even more impressive.
But what if we showed it in proportion to total GDP.
So, that’s interesting. Even though the previous chart seemed to make it look like GDP in the oil and gas sector is booming, this seems to indicate that as a share of total GDP, it’s actually worsened a bit over the years.
In 1997, the oil and gas sector made up 33% of all gross domestic product. However, in the 22 years since then, it’s never been at that level again, let alone higher than it. In fact, it’s never been above 29% since the 1990s, with the lowest proportion getting down to 22.6%, a full 10 point drop. The average over the last 20 years as been only 25%. That means that over the last two decades, 75% of Alberta’s annual GDP, on average, occurred outside of oil and gas.
Now, because the oil and gas sector produces the most of any sector, it probably generates the most corporate income tax revenue, right?
|% of GDP||% of tax|
|Mining, quarrying, and oil and gas extraction||26.07%||4.14%|
|Real estate and rental and leasing||10.33%||7.18%|
|Health care and social assistance||5.71%||3.51%|
|Professional, scientific and technical services||4.90%||5.42%|
|Transportation and warehousing||4.75%||5.86%|
|Finance and insurance||3.90%||16.98%|
|Administrative and support, waste management and remediation services||2.47%||1.44%|
|Information and cultural industries||2.23%||2.85%|
|Accommodation and food services||2.05%||0.89%|
|Other services (except public administration)||1.89%||1.78%|
|Agriculture, forestry, fishing and hunting||1.84%||2.17%|
|Arts, entertainment and recreation||0.54%||0.21%|
|Management of companies and enterprises||0.49%||6.96%|
Hmmm. Not quite. Mining, quarrying, and oil and gas extraction combined came in 1st place for economic production last year but only 10th place for generating corporate income tax revenue for the province. If you separate the two sectors, then oil and gas falls to 12th place, meaning more sectors produced more corporate tax revenue last year than oil and gas, compared to those who produced less.
For example, the manufacturing sector (the largest payer of corporate income tax) generated 4 times as much in corporate tax revenue last year than oil and gas did, yet oil and gas generated 3.5 times more GDP.
Finance and insurance paid more than 2 times as much in corporate income tax revenue than oil and gas, yet oil and gas produced nearly 9 times more economic value. And again, that’s if oil and gas is combined with mining and quarrying.
Heck the “management of companies and enterprises” sector generated nearly 7% of the total corporate income tax collected last year, but participated in less than half a percent to economic output.
But—you may interject—oil and gas have to pay royalties. If you add that to the corporate income tax revenue, they pay even more.
Well, you have a point there. After all, royalty revenue hit $5.937 billion last year.
However, royalty rates aren’t a tax.
You see, the non-renewable resources that oil and gas companies extract from the ground (bitumen, oil, natural gas, coal, etc) are public resources. They belong to the public: to you and to me. We collectively “own” them (as far as anyone can own anything that was here before were).
Corporations shouldn’t be able to come into a territory and extract publicly-owned resources for free. If the public is going to allow them to extract that publicly-owned resource for profit, then the public should be reimbursed for that.
Royalty rates are input costs for a company. Just like a textile company pays for bales of cotton or a vegan burger company pays for bushels of peas.
Alberta is the supplier of the oil, and the bitumen, and the natural gas, and the coal. We, the people, are the supplier; the provincial government simply manages it for us, so we don’t have to. And as the supplier, we’re entitled to charge our customers for the products we sell them.
That $5.937 billion isn’t a tax to corporations. It’s an expense. Like worker wages, or equipment, or utilities, or printer paper.
Just because the government happens to be the supplier doesn’t mean it’s a tax. Just because the supplier of one of your costliest expenses happens to be a government doesn’t entitle you to low tax rates.
And if you’re producing 25% of the province’s GDP, you should probably be paying more than 4% of its corporate income tax revenue.