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Energy-rich and blessed with the ability to draw energy from numerous sources, Canada is among the top 10 producers worldwides of all energy sources except coal, and number one in the production of hydro-electric power. Despite these abundant resources, energy may still seem expensive for many Canadians.

It is at the gas pumps that Canadians witness first-hand the rising price of energy. In 2002, the average retail price for regular unleaded gasoline at a self service station in Halifax was 73.4 cents per litre; by 2005, the average had risen to 97.9 cents per litre.

The arrival of winter is another reminder of the rising cost of energy. Home heating costs fluctuated but increased dramatically from 1992 to 2002. About one in two Canadians heat with natural gas. The average price of a cubic metre of natural gas for residential use climbed 72% over the same period. The one in three Canadians heating their homes with electricity saw their bills rise by 12%. About 1 in 10 heat with oil, and those costs increased an average of 33%.

Powering the economy

Chart: Energy production, by primary energy sourceEnergy has steadily become a larger component of our cost of living and energy costs have risen faster than many other items measured by the Consumer Price Index. From 1994 to 2004, for example, the price of food increased 22%, while the price of energy rose 47%.

While the rising price of oil has increased costs to the Canadian consumer, the overall economy has reaped its benefits. In 2003, energy from all sources contributed $62.8 billion to the economy—about 5.6% of our gross domestic product. In addition, in 2002, 324,000 people worked in the energy sector, representing 2.5% of the work force.

Several regions have benefited from the rising price of energy. One-sixth of the Albertan economy drew on the energy sector in 2002. Due primarily to developments in offshore oil production, Newfoundland and Labrador’s economy is also booming. In 1993, energy contributed 5% to its economic wealth; by 2002, this grew to almost 22%. Nova Scotia’s Sable Island offshore natural gas facility is also fuelling economic growth in that province. During 2000, the facility extracted 3.5 million cubic metres of natural gas.

Keeping pace with demand

Chart: Consumer Price Index, energyCanada is a net exporter of energy. In 2002, just over half of Canada’s total energy production was exported, almost exclusively to the United States. From 1993 to 2003, crude oil and equivalent exports to the United States climbed almost 69%. Canada actually imports some crude oil, primarily from the Organization of Petroleum Exporting Countries, the United Kingdom and Norway.

With general instability in the Middle East, the United States is increasingly reliant on more stable sources of supply, such as Canada. Competition for dwindling reserves of fossil fuels will likely increase U.S. reliance on our energy exports. Booming economies, such as India and China, may also need a larger share of available oil and coal to fuel their economic growth.

Canada’s production of energy continues to grow in order to keep pace with demand. From 1991 to 2002, energy production grew almost 35%. Natural gas production rose most dramatically at 65%, with crude oil production up 38%. Over the same period, electricity generation increased 8% and coal production declined 18%.

New technologies, however, may spur a comeback in coal. Research is underway to burn coal more cleanly and make the generation of electricity from coal-fired power plants a more environmentally acceptable energy alternative. In 2004, the Nova Scotia government requested proposals from private operators to reopen the Donkin Mine in Cape Breton, a potential source of 300 million tonnes of coal.

Getting energy to Canadians

The ice storm of 1998 and the power blackout of August 2003 in Central Canada were clear reminders of our dependence on electricity. They signalled the fragility of a complex system with an aging infrastructure. Following the ice storm, the utilities industry spent $3.0 billion on electrical power engineering construction. By 2002, annual expenditures had increased to $5.2 billion.

The distribution story in Western Canada is pipelines. More than 100,000 kilometres of pipelines crisscross the country, with most concentrated in Alberta and Saskatchewan. The Mackenzie Valley pipeline to bring natural gas from the Canadian Arctic and the Alaska pipeline to bring gas from Alaska through Canada to the United States are both expected to create a new economic boom in Western Canada, Yukon and the Northwest Territories.

Conserving energy

Chart: Principal fuel used for home heating, 2004In the 21st century, three principal factors will likely determine our energy future: resource depletion, demand growth and climate change. Since known conventional reserves of fossil fuels are quickly being used up, for example, Alberta’s oil sands could well assume a more prominent role as a primary source of fuel at home and abroad.

Canada has made a commitment under the Kyoto Protocol to reduce greenhouse gas emissions to 6% below 1990 levels. However, part of the challenge is that nearly all the energy consumed in Canada comes from fossil fuels of non-renewable resources, namely refined petroleum products, natural gas and coal, which release the most greenhouse gases when combusted. From 1990 to 2003, consumption rose 36% for natural gas, 19% for petroleum products and 16% for coal.

One way to cut greenhouse gas emissions is to reduce energy consumption. Another way is to substitute energy types that emit less greenhouse gas—for example, shifting from coal to natural gas. At the national level from 1990 to 2003, a slight amount of substitution was seen in the type of energy consumed: an increase in natural gas consumption meant small reductions in our consumption of refined petroleum products and primary electricity (hydro-electricity and nuclear).