2022 is shaping up to be a record year for Alberta exporters. The province opened the year by setting an all-time high in exports for the month of January. It then repeated that feat in each of the next three months as well.Alberta has been experiencing strong export performance in 2022. In this piece, @BizCouncilAB explores how Alberta's performance compares to other provinces, and what this means for the provincial economy. #abecon Click to Share
In this Quick Read, we dig into Alberta’s strong export performance in 2022 and explore how it compare with other provinces; just how much of Alberta’s export growth this year is simply the result of higher oil prices; and what this means for the provincial economy.
Alberta’s export growth in 2022
To say that Alberta is on pace for a record year in exports is an understatement. Through the first four months of 2022, provincial exports have totalled $62.3 billion, a 57% increase over the same period in 2021—which itself was a record year. In fact, the value of Alberta’s exports through April are higher than they were in the first six months of 2021.
Other provinces are also enjoying strong export growth so far this year, but none come close to what we’re seeing in Alberta; in the rest of Canada, exports are up about 14.2% through April. Aside from Alberta, the next best province (New Brunswick) has seen exports grow by 35%, while in BC and Saskatchewan, exports are up by 33% and 30%, respectively.
Why are Alberta’s exports taking off?
The answer to this question is obvious: high energy prices.
Oil and gas dominate Alberta’s exports. Although the share varies from year to year, over the last five years, oil and gas accounted for about two thirds of Alberta’s total exports. With oil prices today about 175% higher than in 2020, the value of Alberta’s most valuable export product has gone through the roof. From January through April, crude oil exports are tracking 76% higher compared to the same period last year.
The same holds true for Alberta’s other major fossil fuel exports. Soaring prices for natural gas have had a similar impact on the province’s second-largest export, which is up 78% so far this year. Other fossil fuel-related products are a much smaller component of Alberta’s overall export mix but are also much higher: refined petroleum exports are up 90%; and coal exports, 434%.
Is this JUST an energy story?
Energy products are clearly the main driver, but that doesn’t mean that other products are doing poorly. In total, energy exports are about 78% higher than they were last year, while exports of all other goods are up by about 10%. That 10% figure is still better than total export growth in Ontario, Quebec and Manitoba so far this year, and it comes in spite of much lower shipments of wheat and canola through the early part of 2022.
While they are a fraction of the value of energy exports, other fast-growing export products so far in 2022 include primary plastics (up 16%), beef (34%), ammonia (92%), and acyclic hydrocarbons used in producing chemicals and plastics (34%).
Even so, the extent to which oil and gas dominate Alberta’s export mix means that the vast majority of our export growth so far this year is coming from energy products. From January through April, total exports from Alberta are tracking about $23 billion higher compared to the same period last year. Of that total, about $22 billion can be attributed to energy products, with the remainder coming from all other goods combined.
What does this mean for the Alberta economy?
As a large net energy exporter, high oil and gas prices are a net benefit to the Alberta economy. RBC forecasts that provincial GDP will rise by 5.7% in 2022, the second fastest growth in the country, behind only Saskatchewan (6.0%).
As well, high energy prices mean a royalty windfall for the Alberta government. Just recently, the province released its year-end results for the 2021-22 fiscal year. In February 2021, the government had forecast an $18.2 billion deficit but, thanks in large part to soaring royalty revenues, ended up posting a $3.9 billion surplus instead. The numbers for the current fiscal year are bound to be significantly better still, with a double-digit surplus almost guaranteed. That windfall opens up a range of positive options for the government, including debt repayment, re-investing in the Heritage Fund, or targeted spending increases.
But those benefits come at a cost. High energy prices hurt Alberta consumers, most notably at the gas pumps, but also in the cost of electricity (which is mostly generated by burning natural gas) and home heating. Through these and other factors, rising energy prices are also a major contributor to inflation which is chipping away at affordability. In turn, those inflationary pressures are fueling recent and expected future interest rate hikes—in Canada and elsewhere—which will slow economic growth in Alberta and around the world.