Economic Motivation
The economic motivation of doing research in particular area of energy sector and its implications on economy of the state lies in its ability to develop fruitful and deep insights regarding different aspects of energy products. The underlying purpose of the report is to understand the impact of oil exploration and development of energy sector on unemployment rate. As it is obvious that unemployment is reduced when developments take place in the country and the opportunities are created (Huerta, 1998). There are many benefits of having a stable economy because that is a very important factor for the development of the country. The people are aware that the economy is improving and the business activities are taking place properly so there are more opportunities for the customers to have many products to select, the government can have more taxes from the businesses and the society will improve as there will be advancement in the products and services with the passage of time.
Economists are interested in finding out the impact of such developmental activities because the economy and progress of the countries is highly dependent on such developments. In order to work on such reports, great insight regarding development in economy due to any related factor can be gained and economist can predict the future performance of the country as well. Alberta is located in western Canada and it is one of the most populous provinces of Canada. The progress and development in this state can mark huge impact on overall economy of the country and in this regard, the exploration of oil fields can be used as a subject analysis for estimating progress (Macher, 2008). There are many positive aspects of the good business activity that is conducted so it will allow the business to succeed in the long run and contribute to the welfare of the society and assist the government in development of the economy.
Literature Review
Oil fields are characterized by the region containing oil wells that are used for oil extraction. The oil fields are major source of revenues or economic boom for the countries of the world and their progress is highly dependent upon these resources. 94% of oil is concentrated or accumulated in almost 1500 major oil fields. These fields are located in different countries. Gulf countries are one of great importance because many oil fields are located here. Petroleum industry of Canada can be regarded as one of the most flourishing and significant industry in Canada and the overall progress and development in the country is highly dependent upon that sector. According to estimates Canada is sixth largest country in the world in context of oil production (Sandorsky, 2001). The presence of oil in the country allows it to utilize it for several purposes and the growth and development opportunities are present for the people of the country as thy have proper reserves of oil that can be used for the production of different innovative products that will assist the businesses in the society in the long run.
The oil reserves are very important because they have a great economic value. The development of a nation is depending on the efforts of the individuals, businesses and the government. The proper decisions that are made by all the people will ensure the long term growth and progress of the economy as the different industries that are working in the economy will have a strong position in the industry. One of the major contributions of oil sector is export to USA because it is the single or sole supplier of oil to America. The development of Canadian petroleum industry took place along with the development of oil industry in USA. Proven oil reserves of Canada are expected to meet the 140 years needs of the country at current production rate. Proven oil reserves are those reserves that are well identified and know from which oil can be extracted by using current technologies at current economic circumstances. Drilling, testing and production are some of the techniques by which oil reservoirs are proven. Canadian oil reserves are located in oil sand deposits of Alberta that is one of the populous states of Canada. Total Canadian oil reserves are estimated to be 173 billion barrels and 168 billion barrels are only found in Alberta. (Robelius, 2007)
Economic Theories
Economic theories are of great importance in order to explain the impact of energy sector on economy as well as development and progress of the country. Mercantilism is one of the most significant theories that underline the basic elements that are crucial for higher organizational performance. According to this theory, it is claimed that nation’s wealth depends upon availability of the accumulated wealth and resources especially in the form of gold and oil. In this regard it can be said that if the country is self-sufficient in these two resources, the issue of unemployment can be eradicated (Bolton, 1996). As there is wealth and resources so the countries have the ability to improve their economy by using the resources in an efficient and effective manner. The people that are not having enough wealth or resources will struggle to achieve proper progress because that will be having negative consequences for the development and growth of the economy. The improvement in the society is beneficial as that will lead to the welfare of the economy and the development of the people.
The new opportunities that are created for the people are very much important as that allows the people to benefit from their surroundings and achieve high level of growth and progress as part of the society. The theory further argues that in these circumstances, government of the country should prefer exports over imports and it is the only way by which jobs can be created and unemployment can be eradicated. Theory of factor endowment is another most important economic theory that explains the phenomenon of exports and unemployment. According to this theory, it is claimed that those countries who are self-sufficient in crucial resources and are also advantageous as compared to those countries that suffer from scarce resources. This phenomenon is also explained by economic theory and can be viewed in context of Canadian oil reserves that are major source of employment. The issue of unemployment is being minimized due to sufficient resources owned by Canada. (Granger, 1995)
Econometric Models
Econometric models are primarily used for statistical analysis, estimations and econometrics. The purpose of these models is to develop or establish the relationship between different economic quantities or variables that are studied or observed in a particular economic situation. This tool can also be used in order to determine the future development and progress in economy of a particular state.
Dependent Variables
Unemployment is the dependent variable that is associated with booming in oil sector
Independent variable
The booming and progress in oil reserves and oil sector in Canada can be regarded as independent variables.
Explanatory variables
There can be certain set of explanatory variables that will explain the impact of independent variable over dependent variable. It may include government policies, economic conditions and risk factor in doing business. (Zellner, 2004)
Linear regression is one of the most applied and significant econometric models that can be applied in order to analyze the impact of independent variable on dependent variable. This is the one preferred model that has been used by economists in most of the situations that are characterized by such relationship. The relationship between dependent variable and explanatory variables are established by linear regression.
X is the single variable and y is response variable that can be changed by using independent variable. However the predictor variables are held constant in order to administer or analyze the results. In the situation of Alberta, the two variables are of great importance by keeping other constant like government intervention, economic situation and risk factors. Particularly talking about unemployment rate that was the major issue of Canada and Alberta being one of the most populous states was at great risk and the issue of unemployment was at peak. However, the boom in oil fields in Albert opened new horizons in the economic situation. Seasonally adjusted unemployment rate in Alberta is 4.7 %. According to 87% of economic national growth the employment in Alberta was increased by 82300. The state of Alberta has showed significant growth in employment and it was due to exploration of oil fields in Alberta. (Cincera, 1997)
Procedures used for Estimation
Particular procedures or estimation done in order to analyze the impact of booming in oil sector on unemployment is of great significance. Many methods or tools exist that can be used in order to find out the relationship between two relationship variables because it is the only way by which relationship can be established otherwise the desired objectives of relationship building cannot be achieved.
Least square estimation and related techniques
The major estimation techniques have been used in order to develop the relationship and these are discussed below
Ordinary Least squares
It is the most common and simplest estimator and according to the reasonable research it is found to be more appropriate. It was used in order to find out the estimated and observational data. (Doladao, 2003)
In this technique the close correlation between two or more factors can be analyzed. Initially when data was plotted, the results showed that situation of unemployment is at great peak and Alberta is facing this issue due to non-developmental situations. However, after the reasonable development in oil sector, the significant change in the scenario was observed. So, after plotting of data, it was concluded that the gap exists between previous and current situation. (Lee, 2003)
Final Results
After the analysis of different variables that can be impactful in economic situation of the country and their comprehensive relationship building, it has been observed that unemployment and development in oil sector are closely related to each other. Initially, when the country was not self-sufficient in its resources, there was issue of unemployment and other related risks were also noticeable. But with the passage of time, developments in oil sector contributed so much in economy of the country. According to one of the theories of economics, the country became self-sufficient in resources and started exporting products to its neighboring countries and America is one of them. So, it has become evident that this situation created new horizons for the country and the economic situation became better. Alberta earned great revenues and also provided employment opportunities to unemployed fresh graduates of the country. This was the major shift in economic situation of Alberta that was a great challenge from many years (Dusseault, 2001). The success and growth of the businesses is highly depending on making efficient use of the resources of the country as that will strengthen the industry and create more opportunities to grow and succeed in the economy. The development phases are very much beneficial that will enhance the performance of the people to achieve their business objectives and can also engage in resolving the issues or challenges that are being faced. The development and growth of the businesses is depending on the proper guidance and decision making as that will enhance the operations of the business. The competitive nature of the businesses in the economy is very much dangerous for the present businesses as there is a chance that business can lose their customers to new people. The growth and the development of the people in the economy can be ensured by providing proper things to them that would enhance the performance of the people in the society.
Concluding Remarks
After the comprehensive literature review and observation of different facts and figures, it has been analyzed that economy of the any country is largely dependent upon its natural resources. Either these are renewable or non-renewable, importance is worth considering. The proper planning and implementation of the business strategies will be beneficial as that will increase the chances of the growth and development of the businesses in the economy. There are many challenges that are being faced by the business. The issues that are present among the people is that they have to perform well are very good for the development of this work. As far as Canada is concerned, the country is largely dependent upon these resources and following aspects are needed to be taken into consideration.
- The country should primarily focus on renewable energy resources and should work to utilize them.
- The country should focus on the labor force that can be associated to a particular industry. It should strive to work for development of the industry because it will create jobs for the country.
- The government of Canada should work for the development of export sector because in this way, the economic development can be achieved.
- Finally, Alberta should focus on different aspects related to unemployment and should strive to overcome these factors. Oil is the most profitable business and the country should seriously work for the progress of this sector in order to improve the economy of the country. (Hughes, 2010)
The improvement as the proper economic growth takes place so that will improve with the passage of time. The services are proper so it is working for the welfare and development of the people and it is also focusing on the growth and development of the people is better in the economy that is using all the resources in a very effective and efficient way. The long term development of the business will depend that you can have very few. The growth and development of the people in the society is depending on the way they are working. The development of the economy is crucial as that will allow a business to achieve the desired level, the customers of the business will also be satisfied as that will ensure that the products or services that are taken for the task has to be made properly making very good and smart decisions that I am working on. The improvement of the economy is very much important as that will not be good for your health. So it is crucial for the businesses to identify the proper roles and responsibilities of the business to achieve high level of success properly. There are many businesses that are focusing on very urgent and important aspects because they will need to have proper guidance to go to the need to have a proper competitive advantage that will improve the business. The competitive advantage enables a business to achieve high level of growth and development as that increases the chance of the business to earn more profit, revenues and sales that will improve the development and improvement of the economy.
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