Though Ontario would be the biggest provincial beneficiary outside Alberta, it would receive less than 3.8 per cent of that additional economic activity, and roughly 10 per cent of the direct and indirect job creation, the report found. U.S. states would capture far more business, receiving four times the economic benefits as the non-Alberta provinces, according to CERI, which receives its funding from the provincial and federal governments and the Canadian Association of Petroleum Producers.
“The bulk of the money stays here [in Alberta] the bulk of the money is spent here, but the associated impacts in Ontario are significant,” said CERI president Peter Howard, noting that the boom will also generate tax revenues for the federal government that can be used to support programs across the country.
To seize resource-sector opportunities, Central Canadian manufacturers will have to ensure they are part of the supply chain. But to do so, they’ll have to compete with established international giants, with the handicap of a highly valued currency. In some cases, the manufacturers will have to completely reorient their business models.
Ontario’s economy has lagged the national average for the past nine years. It’s expected to fall further behind its more resource-endowed provincial cousins for years to come.
In a recent speech in Calgary, former Bank of Canada governor David Dodge warned of rising political conflict as Canadians continue to adjust to the world of high-priced commodities and increased global competition.
Mr. Dodge said Ontario and Quebec will lag the oil-rich provinces in their capacity to provide health and education services. And that slower growth will put strains on provincial budgets, maintain higher unemployment and, ultimately, put severe stresses on the equalization system that has underpinned Confederation since 1867.
“There will be real social tensions as Canadians are forced to reconsider changes in what we mean by ‘reasonably comparable’ levels of services and taxation” under the equalization scheme, said Mr. Dodge, now an adviser with Calgary-based law firm Bennett Jones LLP.
Ontario first began receiving equalization payments in 2009-10, and can expect $3.2-billion in the coming fiscal year, according to Mr. Dodge and his associates at Bennett Jones. By 2020, Ontario’s payments will climb to $5.5-billion, though still dwarfed by Quebec’s $10-billion transfer. At the same time, Ontario faces tough fiscal choices with spending cuts and possible tax increases as it looks to reduce a yawning structural deficit. “I think this is going to be extraordinarily difficult to manage,” Mr. Dodge said in an interview.
Regional conflict is certainly nothing new to Canada. Going back to the 19th-century national policy that imposed high tariffs and drove up prices of manufactured goods, Western Canadians have often felt short-changed by Ontario and Quebec. That enmity was heightened when the Liberal government under Pierre Trudeau imposed the national energy program, which Albertans in particular saw as an effort to rob them of the gains they could expect from sharply higher oil prices.
Alberta’s effort to defend the reputation of the oil sands gave rise to this week’s spectre of duelling premiers. During a speech in Chicago, Ms. Redford called on other premiers – specifically Mr. McGuinty and Quebec’s Jean Charest – to support her lobbying campaign to have the Keystone XL pipeline built from the oil sands to the U.S. Gulf Coast.
Ms. Redford was furious when Mr. McGuinty responded that Canada’s “petro dollar” was hurting his province, and he’d be happier to see less oil and gas production and a lower dollar. Under a barrage of criticism, the Ontario Premier backed down, saying a healthy energy sector is in the interest of all Canadians.