Margareta Dovgal: Carney must embrace Canada’s petrostate status

For 20 years, critics have hurled the word “petrostate” at Canada. If we are a petrostate, we are an embarrassingly bad one. A real petrostate knows what its resources are worth. Crucially, it seeks to preserve the advantages they provide.

Ottawa refuses to view resource revenue as volatile commodity wealth. By being buried in the base budget, the sector’s economic value is hidden while it masks Canada’s deep-seated productivity failures. Business investment, industrial capacity, and export infrastructure have all atrophied. In lieu of transforming commodity wealth into a sovereign asset, we’ve instead built a housing-obsessed sandbox. Our regulatory failures remain ignored.

Let’s be clear here that oil and gas is responsible for Canada’s enviable quality of life, not a post-industrial knowledge economy nor an enlightened public administration. It represents more than a quarter of domestic exports — $195 billion in 2024, per Statistics Canada. A GDP figure in isolation — energy production represents 7.8 per cent of Canada’s economy — does not show the full picture of just how crucial this sector is. Once pipelines, refineries and petrochemicals are counted, in 2025 the sector employed roughly 900,000 Canadians employed across direct, indirect and induced jobs.

A Canadian worker downstream of resource development can afford a house because oil and gas is one of the only sectors in the country that produces great, well-paying jobs. The conversion of resource GDP into services GDP, when that worker gets a mortgage, pays for a haircut, or remits taxes that fund municipal services, means the broader economic impact isn’t visible. It is not, however, evidence that we are beyond extractive industry.

Ottawa’s dependence is harder to see than Alberta’s. Royalties belong to the provinces. That’s why Alberta reports “non-renewable resource revenue” as a budget line every year, which then gets debated in the legislature and stress-tested against price scenarios. The federal government collects no royalties at all. Its take arrives indirectly: corporate income tax on producers and suppliers, personal income tax on wages, and GST.

Indirect collection doesn’t make national exposure to commodity price volatility any less real, and it is more than an Alberta budgeting problem. As economist Trevor Tombe has recently illustrated, Alberta is riding a “royalty rollercoaster.” There is every reason to believe that all of Canada is along for the ride, more reliant on volatile energy revenues for economic stability and fiscal firepower than ever before.

Oil and gas has also delayed the consequences of failure elsewhere in the economy. Canada is emerging from an unprecedented capital recession. Between 2015 and 2024, more than $1 trillion in investment exited the country. That’s the largest capital exodus in our history, with two dollars leaving for every one that arrived.

Over a decade has been spent funnelling capital into residential real estate and government debt, rather than productive business investment. Land values soared because for decades municipalities made new construction very costly and difficult. The energy wealth sloshing around in the Canadian economy is why we could even absorb this.

Just last month, Carney announced a backstop for condo developers. Sure, that helps save the banks that we are all invested in. But the bailout means that we are doubling down on the very distortions that have made land our default national savings vehicle.

The deeper failure is how we have allowed prolonged abundance to weaken our sense of the constraints that a functioning economy must respect. Material abundance is scarce. It is not a piggy bank that just exists; it needs to be produced and maintained. An ordered society ensures safety and the state works to defend its citizens’ interests in a global economy defined by trade. We’ve had it so good for so long in Canada, that we appear to have forgotten to acknowledge the reality of scarcity and what it takes to keep our resource wealth flowing.

Some critics see dependence but draw the most absurd conclusions from it. The Bloc Québécois pushes the Dutch disease diagnosis hardest: the theory that a booming resource sector inflates the currency and hollows out everything else. Bloc MPs have run the argument at least four times in the House and at committee since January. Mario Simard, vice-chair of the Commons natural resources committee, told the House in June that the energy sector “bumped up the value of the Canadian dollar” and cost Quebec manufacturing most of its jobs. The diagnosis points them somewhere simple: oil dependence is the disease, so we must kill it.

The sector they target finances the welfare state they defend — including the transfer payments that arrive, punctually, in Quebec City. Even B.C.’s NDP Premier, David Eby, has made his peace with LNG. Nothing clarifies the mind like the realities of the provincial treasury.

We can’t afford to spend irresponsibly in either case, but doing so while working to dampen the wealth engine is the most irresponsible path of all.

The right response to dependence is not denial nor incoherent moralizing paired with climate policies ill-suited for the realities of being a major energy producer.

Resource wealth is nothing to be ashamed of. As even Justin Trudeau once so eloquently put it, “No country would find 173 billion barrels of oil in the ground and just leave them there.” Back in 2012 while at the Bank of Canada, Prime Minister Mark Carney himself argued that high commodity prices are an “unambiguous good”.

While the federal government raises and collects revenues from this lucrative sector, it maintains policies like the uncompetitive industrial carbon price that continue to hinder the sector’s ongoing ability to secure investment. What is at stake is our continued ability as a nation to reap the benefits of these vast proven reserves.

As his predecessor puts his full faculties to the task of bouncing around in the latest Katy Perry video, Prime Minister Mark Carney continues to pass on opportunities to publicly distance himself from Trudeau’s catastrophic record on our most productive industry. Certainly enough of Carney’s policy preferences suggest continuity with what has failed us, which detracts from his ability to credibly make the case for new energy export infrastructure.

Not really accounting for our national reliance on the energy sector is, in essence, Mark Carney’s actual pipeline problem. Alberta will take the new oil pipeline, and B.C. has conceded it will too. Execution risks remain — shipper volumes, litigation from Indigenous opponents — but those are the proponent’s problems. Carney’s is political: his own left flank. The case isn’t landing there because the federal government has failed to transparently quantify what the sector contributes to the federal treasury. Carney is asking his caucus to defend a pipeline without first forcing Ottawa to admit what pipelines finance.

The Parliamentary Budget Officer’s assessment of the now cancelled emissions cap, produced last year only because parliamentarians requested it, found that trimming the sector’s output a mere 4.9 per cent below trend would strip $20.5 billion from GDP and 40,300 jobs from the economy in a single year.

So publish the full numbers. The Parliamentary Budget Officer should produce an annual non-resource fiscal balance: the federal position with the sector’s contributions — the taxes it pays directly, and the income tax and GST its paycheques generate as they move through the economy — cycled out. Alberta effectively does this already, and it would end the pretense that our federation runs on services alone.

Transparency is direly needed. It alone won’t be useful if Ottawa continues to erode the revenue base itself. Most importantly, we must scrub the policies that keep making investment in energy an unstable, costly bet.

The opposite of a petrostate is not a country that doesn’t produce oil. It is a country capable of converting natural wealth into permanent national capacity.

National Post