Low oil prices could change financial picture for Alberta's new government
Flashback to last june, oil prices were well over $100.
On Wednesday, the benchmark commodity West Texas Intermediate closed at over $72 a barrel, which is significant as Alberta's budget is heavily reliant on revenues from oil.
One Calgary economist says prices should be closer to $80 a barrel in order for certain provincial programs to feel comfortable, $75 to "balance."
"Every dollar less than that adds about 630 million to what would be a deficit. And so if prices stay where they are now, then the planned surplus is unlikely to actually materialize," said Trevor Tombe, University of Calgary economics professor.
Under Budget 2023, the United Conservative Party (UCP) government projected a surplus of $10 billion, largely due to oil.
It was followed by affordability measures including rebates for eligible Albertans, and the Fuel Tax Relief Program, which runs until June 30.
However, Tombe says low oil prices could present challenges for whichever party wins the provincial election.
"I think it does mean that some of the plans we've seen announced in the election campaign, under the assumption of a surplus for the coming year, might be more challenging to actually follow through on," he said.
UCP ECONOMIC STRATEGY
CTV News reached out to the UCP campaign with questions about low oil prices and what that would mean if it continued after the election and received the following response:
"Under the leadership of Danielle Smith, Alberta's economy is booming and rapidly diversifying. Alberta has welcomed billions of investment dollars in film and television, venture capital, energy, agriculture, aviation and manufacturing, which has created hundreds of thousands of jobs.
"This is a direct result of the UCP decision to cut red tape and lower taxes for job creators, which brings in billions of dollars more in corporate tax revenue than the NDP collected at their high tax rates.
"The UCP also introduced a new fiscal framework in Budget 2023, which is a responsible spending plan that ensures Albertans can rely on balanced budgets, debt repayment, keeping spending in line with inflation and population growth and growing the Heritage Savings Trust Fund. The NDP's plan is to raise taxes on job creators, which caused investment and jobs to flee our province at record levels."
NDP ECONOMIC STRATEGY
The NDP campaign office also responded to a request for comment:
"We need to get Alberta off the revenue roller coaster.
"Last fall, Rachel Notley enlisted Todd Hirsch, one of Alberta's most prominent and insightful economists, to advise the Alberta NDP on how to properly manage Alberta's resource revenues to ensure a thoughtful balance between investing in urgent priorities, paying down debt and saving for the future. He delivered his report in March.
"An Alberta NDP government is committed to a balanced budget, if elected, and will act responsibly to ensure we live up to all of our commitments to Albertans."
It went on to say, "An Alberta NDP government will enact new affordability measures to ensure Albertans can make ends meet. Our party will present a comprehensive plan in the coming days."
GLOBAL MARKET RELEVANCE
Calgary's mayor says she's not hearing concerns from corporate head offices, and diverse businesses also contribute to the economy.
"Not only do we rely on partnerships with the energy sector, but we also have a lot of other businesses and a lot of other opportunities. I know that the energy sector is actively looking at ways to transform the way they do business. So I'm very optimistic," said Jyoti Gondek.
Some energy analysts say the low-price environment is likely driven by fears of a recession in the United States.
"Prices are still very healthy for the producers, but they're not the prices that we saw in 2022. Where you know, on the consumer side, it was pretty harmful," said Jeremy McCrea, managing director of energy research at Raymond James.
He adds that low oil prices can be positive for Albertans, cost of living and inflation.
"Lower oil prices will help at the pump. We've seen natural gas prices come down substantially from where they were in 2020 to here. So it's lower prices to heat your house, lower costs for electricity prices," said McCrea.
Other energy watchers say following the global markets is less relevant than it used to be, as Canadian producers encounter increases from the carbon pricing program, which partially funds the federal Climate Action Incentive plan.
"Uncertainty of carbon pricing is the No. 1 cause for concern in terms of the forecasting for companies now," said Bob Schulz, a professor at the Haskayne School of Business at the University of Calgary.
CTVNews.ca Top Stories
From essential goods to common stocking stuffers, Trudeau offering Canadians temporary tax relief
Canadians will soon receive a temporary tax break on several items, along with a one-time $250 rebate, Prime Minister Justin Trudeau announced Thursday.
She thought her children just had a cough or fever. A mother shares sons' experience with walking pneumonia
A mother shares with CTVNews.ca her family's health scare as medical experts say cases of the disease and other respiratory illnesses have surged, filling up emergency departments nationwide.
Putin says Russia attacked Ukraine with a new missile that he claims the West can't stop
Russian President Vladimir Putin announced Thursday that Moscow has tested a new intermediate-range missile in a strike on Ukraine, and he warned that it could use the weapon against countries that have allowed Kyiv to use their missiles to strike Russia.
Service Canada holding back 85K passports amid Canada Post mail strike
Approximately 85,000 new passports are being held back by Service Canada, which stopped mailing them out a week before the nationwide Canada Post strike.
Taylor Swift's motorcade spotted along Toronto's Gardiner Expressway
Taylor Swift is officially back in Toronto for round two. The popstar princess's motorcade was seen driving along the Gardiner Expressway on Thursday afternoon, making its way to the downtown core ahead of night four of ‘The Eras Tour’ at the Rogers Centre.
Manitoba RCMP issue Canada-wide warrant for Ontario semi-driver charged in deadly crash
Manitoba RCMP have issued a Canada-wide arrest warrant for the semi-driver involved in a crash that killed an eight-year-old girl and her mother.
Here's a list of items that will be GST/HST-free over the holidays
Canadians won’t have to pay GST on a selection of items this holiday season, the prime minister vowed on Thursday.
Mother charged after infant dies in midtown Toronto: police
The mother of an infant who died after being found at an apartment building in midtown Toronto on Wednesday has been charged with failing to provide the necessaries of life.
B.C. man who sold Porsche to scammers shares cautionary tale
A man from B.C.’s Lower Mainland who was scammed while selling his Porsche Cayenne online is sharing his cautionary tale – while calling for increased protections from the government.