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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.


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."


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."


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.