OTTAWA — Canada’s economy is undergoing “rapid and profound changes” as all sectors scramble to adapt with a shift in trade to Asia from traditional north-south lines, says a new Stats Canada study.

The market shifts aren’t simply between a decline in a handful of staple manufacturing industries and booming resources and construction sectors, the study found.

The economy is motorin’ on the back of western energy shipments

“Any period of rapid change triggers fear, and last year was no different,” the paper states.

However, despite dislocations in some sectors, Canada overall rode a wave of prosperity to a 30-year low in unemployment, record equity and housing prices, and rising government and trade surpluses. This was especially true in Western Canada, which was uniquely positioned to profit from its resources and its geographic proximity to the U.S. and China.

Energy Dominates:

“Energy exports single-handedly lifted the trade surplus to a record high,” the study states. “Armed with bulging profits and attracted by bright prospects, energy companies again drove the upturn in business investment.”

However, the face of the energy industry itself is changing rapidly. Conventional supplies of oil and gas are dwindling, especially as conventional fields in the West yielded less output in 2004 and 2005. Instead, producers shifted to offshore and non-conventional supplies.

This has been most evident in oil, where the oilsands now account for 42 percent of all domestic oil output.

Natural gas production too is moving to non-conventional sources. All of the increase in output since 2004 has come from coal-based methane, as conventional supplies have begun to dwindle.

The oil and gas industries sprouted long coattails as profits spread to other sectors. Prices for a wide range of metals hit record highs such as non-metallic minerals which reflected renewed interest in uranium and potash.

Mining jobs rebounded 16 percent last year, while investment in mining jumped 20 percent.

A spin-off of increased demand for commodity exports was a rebound in transportation. Rail and water were particularly strong due to the transport of commodities.

“Nowhere was the pre-eminence of the oil and gas, mining and transportation industries more evident than in profits. The operating profits of these industries soared by $16.2 billion last year, 80 percent of all profit growth,” the study states.

Resources Stronger Longer:

The growth of the resource sector has revived fears that the current boom will quickly revert to the bust of previous cycles. “The spectacular bubble and subsequent train wreck for information and communications technologies manufacturing at the turn of the millennium is now the standard for instability against which all cycles are measured,” the authors of the paper write.

So is the same true for energy today? Not likely — at least not yet. The study cites solid arguments that prices will stay “stronger for longer.”

By comparison, the cyclical ups and downs in oil and gas drilling (by far the most volatile part of the energy sector) were smaller on average. Also, previous jumps in energy prices were driven by cuts to supply, whereas the current surge was driven by continued strong demand.

The recent boom-bust cycles for oil and gas have been no more severe than for other sectors of the economy.