The results of this quarter's C-Suite survey underline the centrality of resources to the Canadian economy. While some people are inclined to view the drop in commodity prices, especially oil, as something affecting one region and one sector of the economy, executives told us the negative ramifications are significant throughout the economy, across the country.
There are many indications of this. One is that the pain is being felt in every sector. There is carnage in oil and gas, with three quarters of businesses reducing employment and more than half reducing capital spending. But most executives outside of Western Canada say the drop in oil prices is hurting their business, too. It is pronounced in the services sector, including financial services. What about manufacturing, which allegedly benefits from dropping input costs? While half of manufacturing executives say the fall in oil prices has helped them, almost four in 10 say it has hurt.
Executives also say low commodity prices are a more powerful negative than a strong U.S. economy is a positive. Despite a U.S. economy widely expected to grow this year, most Canadian business leaders expect the Canadian economy to shrink. The C-Suite has been more bullish on the U.S. economy than on the Canadian economy since June, 2014.
The importance of oil looks likely to bring business into conflict with the new federal government on climate-change policy. While the C-Suite supports some green measures, such as government investing in clean-energy technologies, it does not support an aspiration to eliminate fossil-fuel usage.
When asked about phasing out fossil fuels by the year 2050, a goal pushed aggressively by some environmentalists, economists and organizations, many Canadian business leaders are dismissive. Only one in five members of the C-Suite think that objective is remotely realistic. More tellingly, most did not think it was a worthwhile goal.
Vehement rejection of this objective by executives in the oil industry and in Western Canada is to be expected. However, they are joined by almost half of the C-Suite in Central Canada and a majority of service-industry leaders. This stands in stark contrast with the views of the Canadian population, most of whom say they will be disappointed if we are still using fossil fuels in thirty years time.
Almost as many executives think Canada will never completely eliminate the burning of fossil fuels as think it could happen in the latter part of this century. Over all, barely half of the C-Suite thinks the commitment Canada made to achieve that goal by 2100 is doable. Some obstacles business leaders see are technological – there won't be alternatives in that time frame. But much of the objection is economic – it's too costly or damaging to Canada's economy.
Canadian businesses consider the oil and gas industry to be a pillar of economic success. It is a leap of faith for them to imagine a prosperous Canadian economy without it.
David Herle is principal and Alex Swann is vice-president of Gandalf Group.