Energy Prices and Business Decision-Making in Canada: Preparing for the Energy Future

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Summary

Canada has abundant energy sources, from vast oil sands to ample hydroelectric capacity, offshore oil, natural gas, and coal. Given this energy-rich environment, Canada has relatively low energy prices and an energy-intensive industrial structure with the business sector accounting for about three-quarters of total energy demand. However, energy prices are rising overall and Canadian businesses have faced price volatility for quite some time. Adding to the challenge of price volatility is the increasingly complex nature of the energy environment as a whole. Advances in oil and gas extraction, alternative energy sources, Canadian electricity prices, regulations, and new technological developments will all have an effect on the energy environment and the strategies undertaken by Canadian businesses.

To better understand the effects of the energy environment on Canadian business decision-making, the Minister of Industry, on behalf of Industry Canada, asked the CCA to assess the opportunities and risks to Canada related to the potential for sustained higher energy prices.

The Sponsor:

Industry Canada

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The Question

What are the opportunities and risks to Canada related to the potential for sustained higher energy prices?

Key Findings

Energy Prices and Business Decision-Making in Canada: Preparing for the Energy Future provides a comprehensive overview of how Canadian businesses have adapted to rising and increasingly volatile energy prices, and explores ways in which businesses can enhance their resilience. Most notably, the report presents the results of a new survey on business decision-making, which was administered to more than 1,000 Canadian firms, as well as sector profiles that assess the past resiliency of the Canadian industries most exposed to energy prices (i.e., the energy intensive resource-based, manufacturing, and transport sectors; the capital intensive oil and gas, mining, and electric power sectors; and the transport equipment sector). Overall, the report serves as the most up-to-date resource for Canadian businesses and policy-makers as they seek to understand the implications of the complex and uncertain energy future and what it means for Canada’s economic prosperity.

Exposure to energy prices varies by sector. A firm’s strategy depends on whether it is energy intensive, capital intensive, or produces energy-intensive products.
Firms have successfully adapted to energy price changes in the past, but there is no guarantee that this resilience will continue into the future.
Despite higher global energy prices, it is unlikely the competitiveness of Canadian firms will be strongly impacted.
A majority of firms (66%) reported that controlling energy costs was important for competitiveness.
Increased preparedness in exposed sectors would mean greater resilience and better adaptation should energy prices change.