Economic diversity is the key to Canada’s success at making money—when one part of the country is suffering economically, another is booming. Canada is the second-largest country in the world with a surface area of over 3.8 million square miles. There are about 37 million people living in Canada, and with a gross domestic product (GDP) of $1.73 trillion, it’s the tenth largest economy in the world. Four industries that bring in a good portion of the revenue for Canada are 1) oil and gas, 2) energy, 3) manufacturing, and 4) tourism.
- With a gross domestic product (GDP) of $1.73 trillion, the Canadian economy generates a good portion of its money from four main industries 1) oil and gas, 2) energy, 3) manufacturing, and 4) tourism.
- Because the price of oil can fluctuate dramatically, Canada has increased investment in other energy revenue sources, such as hydroelectricity.
- Canada's diverse geography and cultural attractions draw about 31.3 million visitors annually, making tourism an important component of how the nation makes money.
- Other revenue sources for Canada come from the agricultural and fishing industries, along with the government itself, which employs about 288,000 people.
Oil & Gas
The oil and gas industry is a large part of the Canadian economy, and it suffered immensely when the price of oil fell in late 2014. While the price-per-barrel has rebounded somewhat since hitting a low in early 2016, the myriad of factors that impact the price of oil (and can cause it to fluctuate dramatically) have given Canada the incentive to diversify into other energy revenue sources.
Canada's Oil Provinces
Canada currently has the third-largest oil patch in the world, most of it in oil sands and crude. Oil is found throughout Canada, with the largest onshore reserves being in the western provinces of British Columbia, Alberta, and Saskatchewan, as well as in the northern territories. There is also oil offshore near the provinces of Newfoundland and Nova Scotia.
Alberta is an oil province. The Athabasca Oil Sands are still far from their peak production, yet, with the province collecting royalties on each barrel sold, almost 30% of the province’s revenue comes from oil. This figure is alarming to some, and, as can be expected, a fall in the price of oil can lead to a budgetary crisis.
Other Oil Industries
In addition to oil production, the western provinces are also home to oil-related industries. From exploration to petrochemicals to plastics, Canada earns a lot of money from oil. The two largest cities in Alberta—Edmonton and Calgary—are home to hundreds of oil headquarters and laboratories. In the north, cities have been built for the sole purpose of supporting the oil and gas industry.
Canada exports about 3.7 million of the 4.6 million barrels of crude oil it produces a day. Most of these exports go to the United States through various pipelines. Canadian oil companies are hoping to begin exporting oil to new markets—provided they can get pipelines built to ferry the oil away from the landlocked, northern oil patches.
Oil and gas aren’t the only energy revenue sources in Canada. The country has huge coal deposits in the western provinces of British Columbia, Alberta, and Saskatchewan that are exported to Asian countries. The province of Quebec has uranium and other mineral mines, and Alberta, Quebec, Nova Scotia, and Prince Edward Island are home to many wind farms.
The big energy earner, though, comes from a mostly renewable, alternative energy source: hydroelectricity. Hydro plants are found in every province except Prince Edward Island, and while a lot of it is cheaply sold to and used by Canadians, several provinces export a much larger percentage than they consume. Quebec, for example, exports hydro-electricity to Vermont, Massachusetts, and New York, in addition to selling it to other provinces. The Pacific Northwest and northern Midwest also import Canadian hydro-electricity.
The Canadian dollar has been declining at a rapid pace: $1 USD could buy $1.07 CAD in July 2014; it can fetch $1.33 CAD as of Feb. 2020. While Canadians now have to pay more for imports, the weak dollar is great news for the Canadian manufacturing sector, which produces food, machinery, motor vehicles, and aerospace manufacturing.
The central province of Ontario has been building cars for General Motors (GM), Ford (F), and Chrysler for at least 50 years, and the Ambassador Bridge, which connects Detroit to the Canadian automotive city of Windsor, carries 25% of Canada’s exports. Quebec is home to Bombardier, a company that designs and builds snowmobiles, buses, aircraft, and trains that are sold internationally.
Canada is the second-largest country in the world and has a very diverse geography, history, and culture, making it a prime tourist destination. The country's diversity, as well as hosting three Olympic Games and having 20 UNESCO World Heritage Sites, means there is something for everyone in Canada. In the northern territories, visitors can see the Northern Lights and explore the polar ice fields. They can check out Vancouver, the Rocky Mountains, dinosaur parks, festivals, and museums in the western provinces.
In the central and eastern provinces, tourists can visit historical sites, Niagara Falls, Montreal, Quebec City, and Ottawa, as well as hundreds of museums and festivals. There are national parks throughout the country that are worth a trip for the nature-loving traveler.
The tourism industry in Canada employs 1.8 million people and is supported by 31.3 million visitors each year. With $90 billion in annual revenue, tourism accounts for a $34 billion increase to the Canadian GDP.
About 75% of the overseas tourists to Canada came from the United States in 2018, spending $10.6 billion during their stay.
Other Revenue Sources
Farms cover the Canadian countryside with the obvious exception of the northern territories. Canadian farms grow grain, fruits, and vegetables, along with raising cattle for dairy and meat. Crops are also transformed into a variety of products, not limited to wine, beer, candy, and whiskey. Canada is also a big producer of honey and of maple syrup, and large percentages of the country’s agricultural products and by-products are exported.
Despite fishing being the sole economic resource for many coastal communities, the fishery industry is not well-known to most Canadians. The fishing industry employs approximately 80,000 people and adds about $6.8 billion to the economy.
Lastly, the government is the main provider of education and health care in the country. Education until high school is, more or less, free, and post-secondary education is either free or subsidized. Medically necessary health care is provided free of charge by the government. As a major employer in each province, the government ensures a steady income for about 288,000 Canadians.
The Bottom Line
If visitors were to come to Canada to view the ways that Canada makes money, they would be overwhelmed with the stops on the tour. However, despite a diversified economy and strong economic plans for the future, the Canadian economy has shown modest growth. Real GDP gained only 1.7% in 2019 and is forecasted to grow by 1.8% in 2020.
For Canada to continue to make money and improve its prospects, experts say more money will need to be spent on business investment. The Canadian government, on the other hand, is under pressure to maintain fiscal responsibility, which could put a damper on efforts to grow the economy through various business sectors.