Oil price plunge puts Alberta budget into question
CALGARY -- A slip on the commodities market could mean it will take longer to balance the budget, the premier's office conceded Friday.
"Every dollar reduction in the price of WTI (West Texas Intermediate oil) takes about $200 million out of provincial revenues," said Jason Kenney, speaking from Morinville, Alta. this morning. "We just don’t know how long this situation is going to prevail."
The benchmark price of WTI closed at $41.28 to end the day on Friday.
Alberta’s 2020 budget, released just last week, anticipated $58/BBL — a full 25 per cent more than where it currently sits.
Many economists questioned UCP Finance Minister Travis Toews seemingly optimistic outlook for both future oil prices and unemployment levels since they were much more positive than other industry projections.
Toews vowed to adjust the budget down the road if his projections didn’t materialize — but Kenney says it's too soon to change direction, given that much of the uncertainty around oil pricing right now is tied to fears that COVID-19 could slow the economy.
"There is no point in us making significant changes to fiscal policy right now when nobody knows how long and how deep the impact of the coronovairus downturn will be," said Kenney. "We’re going to have to assess that."
Economists say if the price of oil remains low, it could mean a shortfall of several billion dollars in Alberta’s anticipated revenue.
Kenney says the government will consider retooling the 2020 budget down the road if things don’t turn around.
"We’re going to have to monitor the situation very closely, we’ll make changes if we need to modify the course it will likely be in a few months' time."