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Canada's natural resource wealth, 2008

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Value of natural resource assets increases

Joan Forbes, Environment Accounts and Statistics Division

Wealth is an important indicator of economic performance, as it represents the potential to generate future income. A country’s national wealth is often thought of as the value of its manufactured assets, for example, infrastructure and machinery, and its residential, commercial and agricultural land. However, the broader view of national wealth recognizes the important contribution of natural resource assets to the economy and society. This alternative measure quantifies such a contribution by valuing stocks of natural resources, land and ecosystems and incorporating these values in the analysis of national wealth.

This article examines the value of key natural resource stocks in Canada in 2008, focusing on timber, energy and minerals.

What you should know about this study

This study uses data from the Natural Resource Stock Accounts. These accounts measure the value of natural resource assets (or stocks) in their natural state, for example, as reserves of metal ore in the ground, or accessible stands of timber in forests.

The approach taken to value resources is similar to that of valuing annuities—a resource’s value is equated to the stream of income that can be generated from extracting it over its useful lifetime.

The first step to estimating the stream of income involves calculating the current year’s income from extraction. Income, also known as resource rent, is equal to total revenue received from sales throughout the year minus all costs incurred during extraction. Costs include operating costs, like fuel and labour, as well as the capital costs, such as wear-and-tear on machinery. Income taxes, royalties1 and other costs that are not directly due to the extraction process are not subtracted.

Next, for the sake of simplicity, it is assumed that the quantity extracted as well as the rent generated from extracting the resource will remain constant in each successive year until reserves are exhausted. A final step in valuation is to calculate the present value of this stream of income. Since any rent that will be received in the future is worth less than it would be if in hand today, all future rents must be discounted before being summed together.

Two limitations of this approach are the assumption that the quantity of extraction will remain constant over the life of a resource and the assumption that the difference between sales revenue and extraction costs will remain the same through time. Oftentimes, the price of a natural resource is more volatile than labour and capital costs. These limitations tend to be magnified during periods of extreme volatility in resource prices. Such was the case when record high prices were observed for much of 2008, followed by sharp price declines. Despite these limitations, this method has been widely used by other countries given the difficulty in accurately forecasting commodity prices. Current estimates are based on fourteen different resources for which data on reserves, revenues and extraction costs are available.

For more information please see Definitions, data sources and methods: Natural Resource Stock Accounts.

  1. Because part of the income from extracting a resource goes to governments (e.g. taxes and royalties), taxes and fees paid by extractors are not subtracted as costs: this makes them implicitly part of the rent.

Value of natural resource assets increases

The value of selected natural resources (timber, energy and minerals) rose 45.3% to $1,723 billion in 2008 (Table 1), following a 1.0% decrease in 2007. This amounted to over 22% of Canada’s total wealth including natural resources.1 Among these three broad components, energy increased by 72.5%, minerals were up 22.2% while timber posted a 3.9% decline. Increases in the value of crude oil, natural gas, crude bitumen, coal and potash offset declines in timber and a number of metals.

Table 1 Value of natural resource reserves

The value of natural resource assets was up overall for 2008 despite price declines in the latter part of the year (see textbox: “Price volatility of natural resources” for more information).

Price volatility of natural resources

Energy and metal prices tend to be more volatile than, for example, prices of consumer goods. To help minimize the impact of this volatility when placing a value on these sub-soil assets, natural resource economists tend to assess their value over the course of an entire year or even longer, rather than at one point in time.

While this approach helps analysts focus on longer term trends in resource values, it also makes the estimates less responsive to short-term changes in economic conditions.

The state of affairs in 2008 provides a good case in point. In 2008, prices of crude oil, natural gas and crude bitumen, were very strong through the first eight months of year, but then fell sharply as the global economic downturn took hold. Despite this rather abrupt change in prices, estimates of the value of energy resources were up sharply for the year overall—the strength of the pre-downturn price growth was more than enough to offset the declines that followed.


The value of energy assets increased 72.5% to $1,162 billion in 2008 (Table 1), due to record high prices for crude oil, crude bitumen, and natural gas during much of the year. Higher prices easily offset increased operating and capital costs. Energy assets made up over 67% of total natural resource assets in 2008, up 10 percentage points from one year earlier.

The value of crude bitumen almost doubled in 2008 reflecting increased production, increased reserves and record-high prices for much of the year. Crude bitumen alone accounted for over half of the value of all energy assets and more than one third of the value of all natural resource assets in 2008.

The value of crude oil and natural gas were also up significantly in 2008, increasing 55.4% and 40.2% respectively over their 2007 values. Higher prices for much of 2008 more than offset increasing operating and capital costs.


The value of mineral assets,2 such as gold, nickel and potash, increased by 22.2% to $324 billion in 2008. This substantial gain can be attributed to increased potash prices which almost tripled in 2008, and offset declining prices for many metals.


The value of commercial timber reserves was down by 3.9% in 2008, following a decline of 7.2% in 2007. Weak demand for lumber in the U.S. housing market explains much of these declines.


  1. Canada’s total wealth includes produced assets such as residential and non-residential buildings, machinery and equipment and consumer durables, as well as non-produced assets such as land and natural resources. See Statistics Canada CANSIM table 378-0005 for details about what is included. Other important natural resource stocks such as water and ecosystems are not currently valued by Statistics Canada due to data limitations.
  2. Mineral assets include gold, nickel, copper, lead, zinc, iron, molybdenum, uranium, diamonds and potash.