Economic uncertainty is front and center in Canadian news these days. The new administration in the United States is determined to shake up the existing world order through tariffs and tough talk, and much of that is being aimed at their neighbour to the north. That’s right, Canada—a country that would, under normal circumstances, be aptly described as the USA’s best buddy in the community of nations—is now awash in panicky headlines, apprehensive business owners, and puzzled policymakers trying to make sense of a tense, fluid, and fast-moving situation.
It’s easy to understand why. For nearly the entirety of the country’s existence, Canada has depended on the US for two key things: continental defence and, chiefly, a large, geographically convenient market in which to sell its manufactured goods and abundant natural resources. With the return of Donald Trump to the White House, all of that is now seemingly in jeopardy.
There is, however, one Canadian business executive keeping a cool head about the situation. James Kydd is a twenty-plus-year veteran of the oil and gas sector based in Calgary, the largest city in the province of Alberta, otherwise known as the oil spigot of North America. Kydd is much-lauded within his industry for his roles in the construction and management of such important infrastructure projects as the Trans Mountain Expansion Pipeline, the Coastal Gas Link Pipeline, and the North Montney Mainline, among others. He is also, due to his intimate knowledge of all things fossil fuel and pipeline-related, considered something of an authority on heavy industry, and he remains bullish on the Canadian economy, even in the midst of President Trump’s heavy-handed, hard-to-read, and blustery rhetoric.
“At the end of the day, a good relationship between the United States and Canada is in both countries’ best interest,” he explains. “And the reason for that can be boiled down to one word: energy. We are endowed with an incredible energy supply within our borders in Canada. We have veritable oceans of crude oil and natural gas—more than we could ever use ourselves. But that’s just as well because our American brothers and sisters consume a ton of it. We have it, and they want to buy it.”
The health of the natural resource sector, with energy production and transportation as one of its central pillars, has long been held to be a harbinger of what to expect from the Canadian economy. According to data from the Canadian Association of Petroleum Producers (CAPP), the oil and natural gas industry contributed $71.4 billion, or 3.2%, to Canada’s GDP in 2022. During the same period, Canada’s real gross domestic product (GDP) grew by 3.8%.
On the other side of things, in 2015, Canada’s real GDP growth slowed to 1.0%, down from 2.6% in 2014. This directly coincided with a dramatic drop in crude oil prices, which fell from over $100 per barrel in mid-2014 to below $40 per barrel by the end of 2015. This decline in oil prices led to reduced revenues in the energy sector, resulting in decreased investments, particularly in Canadian oil-producing regions, and including pipeline construction, among other things.
“While the Canadian economy is well-diversified—we are not what you might call a Petro State, like, say Venezuela, Russia, or Saudi Arabia—our economic fortunes are at least partially linked to energy production,” Kydd remarks. “Putting it another way, when our oil supply flows freely and sells for a good price, we tend to do well. When it does not, we tend to feel it.” That being the case, the state of pipeline construction, what James Kydd maintains to be a harbinger of the larger harbinger of natural resource development, is a telltale sign of what might be in store for the Great White North economically in the near future.
“It’s an open secret among Canadian economists, high-ranking government officials, and industrial executives that the nation’s economic outlook largely follows that of the rate of oil and gas pipeline construction,” says Kydd. “Of course, it’s a correlation rather than a causation, but it’s an important indicator nonetheless.”
Recent data supports this correlation. The Oil and Gas Pipeline Construction industry in Canada experienced a revenue decline of 2.7% in 2023, according to data compiled by IBISWorld. Around the same time, a report from Statistics Canada indicated the larger Canadian economy took a hit, with real GDP growth slowing to 1.5% in 2023, down from 4.2% in 2022 and 6.0% in 2021. However, industry projections indicate something of a reversal of this trend on the horizon, with an estimated increase of 2% in 2024, bringing industry revenue to a robust $12.5 billion.
The completion of major new projects further illustrates this positive trajectory. The Trans Mountain Pipeline Expansion, for instance, recently tripled its capacity, amounting to an additional 590,000 barrels per day, and giving a sizable boost to Canada’s oil transportation infrastructure. These developments not only help the energy industry but also have a wider positive impact on the economy. According to research conducted by the Canadian Energy Centre, each additional million barrels of crude oil transported through pipelines contributes $23.2 million to Canada’s GDP and supports 69 jobs, both directly and indirectly.
“Pipeline construction remains strong in Canada, right now. If anything, it’s on the uptick. When you see it start to decrease, that’s when it might be time for concern,” states James Kydd. “Fewer pipelines in development likely means a bottleneck in transporting our energy resources, which means reduced revenues and potential job losses, which would be very bad news for the overall economy. Until then, though, I’m optimistic that the Canadian economy will remain strong.”
