In this week’s EconMinute, we’re talking about two of Canada’s most valuable product exports: crude oil and motor vehicles.
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The value of Canada’s total product exports decreased 2.3% in September. Despite this month-over-month decline, trade remains a bright spot for the Canadian economy: 16% above its value a year ago and 11% above its value in February of 2020.
However, underlying this topline growth, two of Canada’s largest exports—crude oil and motor vehicles—have faced very different fortunes. Following the initial onset of the pandemic, both saw a precipitous decline in sales, but what happened next was different.
While motor vehicles were initially quick to bounce back, oil was not: people continued to purchase cars over the first couple of months but immediately found themselves driving less. Since then, a shortage of semiconductor chips, a key input for cars, has limited the production—and thus export—of motor vehicles (something noted in a previous Econ Minute). Meanwhile, Canada’s crude oil exports have continuously grown in volume and value since May, as the world has begun moving and traveling again while OPEC has continued to restrict supply.
Putting some numbers to the story:
- As of March of 2020, both crude oil and motor vehicle exports reached a ten-year low of $1.2B and $1.1B respectively, in the immediate aftershock of the pandemic and initial restrictions.
- By July, motor vehicle exports had more or less regained their previous level, while oil exports bounced back to a mere 50% of pre-pandemic levels.
- As of the beginning of 2021, oil exports had more fully bounced back but motor vehicle deliveries, which started to falter towards the end of 2020, were in decline.
- More recently, in May, crude oil exports took off as the WTI price of oil started to push close to $70 per barrel. Meanwhile, motor vehicle exports continued to decline.
Though the latest data available ends in September, it seems likely this trend will have continued since. Supply chain complications remain, and OPEC shows no sign of expanding output. Most recently, WTI prices are pushing $80 a barrel.
While high oil prices, and crude export values, are a reprieve to the industry and government revenues in Alberta, challenges within the motor vehicle industry are a reminder of the continued plight of global supply chains whose kinks seem unlikely to be ironed out anytime soon.