Research

The global push to move away from fossil fuels carries significant implications for oil exporting countries. In this paper I develop a quantitative model of a small open oil exporting country and apply it to Canadian data to quantify the welfare impacts of the 2000s oil price boom before investigating the predicted welfare affects of vanishing global demand for fossil inputs. Consistent with the existing literature, my model produces welfare gains out of the 2000s energy price boom. The model predicts significant welfare losses for both current and future generations when the global demand for oil decreases over a period of 30 years.

We study the behaviour of Canadian Total Factor Productivity (TFP) growth over the past 60 years. We find that the observed stagnation during the last 20 years is entirely accounted for by the Oil sector. Higher oil prices made capital-intensive sources of oil like the oil sands viable to extract on a commercial scale. However, the greater input required per barrel of oil slowed TFP growth. Comparing Canadian TFP growth to those of the United States and Norway reinforces these results. However, our result should not be interpreted to carry any welfare implications.