Abstract
Since the energy crisis of 1973-74, the Canadian government has followed a policy of shielding the household and business sectors from the full impact of world energy prices through a system of subsidies on oil imports financed by indirect taxes on exports and gasoline consumption. Western provinces have enjoyed a rapid accumulation of revenues related to royalites, investments and generally buoyant activity. Through the careful manipulation of the levers of an econometric model of Canada, a picture of the consequences of an increase of domestic energy prices to US levels can be traced through to such key measures as the Consumer Price Index, the Unemployment Rate, Real Gross National Product and Employment. In this paper annual increases in crude oil prices of $20.00 a barrel and equivalent increases in natural gas prices are imposed on a base case projection from 1981 to 1986, and the impacts on the Canadian economy are assessed.
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