Canada is already an energy superpower. That’s the problem.
Faced with a sluggish economy and mounting uncertainty about its trading relationships, the federal government has announced a major new pipeline project, clearing the way for oil producers to double output and committing billions in public funds to the effort. The pitch is familiar: exploit Canada’s abundant resource endowment and ride it back to prosperity. But the evidence suggests this strategy has been tried — and has fallen short — for a generation.
A superpower that hasn’t delivered growth
Since 1990, Canadian oil and gas exports have grown four times faster than overall exports, cementing the country’s position as the world’s fourth-largest energy supplier. Yet over that same period, average annual per capita economic growth has trended steadily downward, now approaching zero. Adjusted for inflation, average incomes have already begun to decline. The energy sector’s expansion and the broader economy’s stagnation have unfolded in parallel — a difficult fact for pipeline proponents to explain away.
The long-term price picture for oil reinforces the concern. Outside a brief boom in the early 2000s — itself a one-time phenomenon driven by China’s rapid industrialization and a global commodity supercycle that peaked around the 2008 financial crisis — oil prices have either stagnated or fallen for most of the past half-century. There is no compelling structural case for a repeat of that cycle.
The financial markets tell a similar story. A dollar invested fifteen years ago in an oil and gas index fund would be worth roughly $1.50 today — a real-terms loss once inflation is accounted for. The same dollar placed in an S&P 500 index fund would have grown to $6. In the tech sector, via a Nasdaq tracking fund, it would have returned nearly $10. The gap is not marginal. It is enormous.
A world moving in a different direction
The global economy is decarbonizing, and energy sovereignty has become a strategic priority for a growing number of countries — whether through domestic fossil fuels or, increasingly, renewables. Global sales of internal combustion engine vehicles peaked around 2016 at 80 million units. Today that figure has dropped to 60 million, while electric and hybrid vehicles are expanding rapidly in the developing markets that will drive most future demand. Canada, meanwhile, has slipped from the world’s fourth-largest auto exporter in 1990 to ninth today — a trajectory that reflects the cost of anchoring economic strategy to industries in structural decline.
Some argue that Canada should extract its oil wealth now and use the revenues to fund a transition into new industries. It is not an unreasonable idea in principle. But in practice, Canada has not behaved like Norway or the Gulf states, which have systematically reinvested resource revenues into economic diversification. Canadian royalties have largely been spent rather than deployed as long-term development capital. Low provincial taxes may benefit Albertans directly, but there is little evidence the savings have seeded the kind of industrial transformation seen elsewhere.
The opportunity cost question
Even if Canada were to redirect oil revenues more strategically, a deeper question remains. Every public dollar committed to expanding a mature fossil fuel industry is a dollar not invested in sectors with stronger long-term growth prospects. Opportunity cost is real, and it compounds over time.
China’s economic trajectory offers an instructive contrast. In 1990, China’s comparative advantage lay in agriculture and low-value manufacturing. Had it simply doubled down on those strengths, it would remain a middle-income exporter of basic goods. Instead, it pursued deliberate industrial policy in emerging sectors. It exported no cars in 1990. Today it leads the world in electric vehicle production — a position built in part at the expense of traditional auto exporters like Canada.
None of this means Canadian oil and gas production should be abandoned overnight, or that the workers and communities tied to the sector should be left without a plan. Regional economies are real, and the livelihoods attached to the energy sector across Alberta, Saskatchewan, and Newfoundland and Labrador deserve serious policy attention — not dismissal. But serious policy attention means honestly evaluating returns, not simply reaffirming a strategy because it once worked.
What proponents need to explain
The burden of proof now rests with those advocating for major new public investment in pipeline infrastructure. The core question is straightforward: why will this approach deliver sustained economic growth when decades of expansion in the same sector have not? Canadians deserve a clear answer — not a promise built on projections that the market itself does not appear to believe.
Public funds are finite. So is time. The countries pulling ahead economically are not the ones betting on yesterday’s industries. Canada’s federal institutions, its capacity for long-term investment, and its regional diversity give it real tools to chart a different course. Whether it uses them is a political choice — and it is one that should be made with eyes open to the evidence.
