Alberta’s Deficit To More Than Double, Hit by Oil Price Drop

Alberta, Canada’s main oil-producing province, is projecting its budget deficit will more than double in the coming fiscal year after softer crude prices coincided with a surge in population to strain public finances.Author of the article:You can save this article by registering for free here. Or sign-in if you have an account.(Bloomberg) — Alberta, Canada’s main oil-producing province, is projecting its budget deficit will more than double in the coming fiscal year after softer crude prices coincided with a surge in population to strain public finances.Subscribe now to read the latest news in your city and across Canada.Subscribe now to read the latest news in your city and across Canada.Create an account or sign in to continue with your reading experience.Create an account or sign in to continue with your reading experience.The deficit in the fiscal year starting April 1 is forecast at C$9.4 billion ($6.9 billion), up from C$4.1 billion in the current fiscal year, the provincial government said on Thursday. The shortfall will be the largest since the Covid-19 pandemic and there won’t be a return to a balanced budget in the near term.It’s partly a revenue issue: royalties from bitumen are set to drop to C$9.7 billion, down 44% in two years.Get the latest headlines, breaking news and columns.By signing up you consent to receive the above newsletter from Postmedia Network Inc.A welcome email is on its way. If you don't see it, please check your junk folder.The next issue of Top Stories will soon be in your inbox.We encountered an issue signing you up. Please try againInterested in more newsletters? Browse here.Home of the Canadian oil sands, Alberta has had a sharp turnaround in its fiscal fortunes. A nearly C$12 billion ($8.8 billion) surplus four years ago has vanished as oil plummeted to about $65 a barrel from a high of more than $100. The province accounts for about 85% of oil production in Canada, the world’s fourth-largest producer and largest foreign supplier to the US.Danielle Smith, Alberta’s conservative premier, facing a nascent movement by some activists for the province to separate from Canada, last week announced a referendum planned for October that would ask the public to back restrictions on immigration and a reduction of access to some public services for newcomers. Beyond the referendum, she has pledged no drastic cuts to expenses or major tax increases. The impact of restricting services to newcomers without Canadian citizenship or permanent residency on the budget is not yet known and will require further study, Finance Minister Nate Horner said in an interview. The province forecasts an average price of $60.50 a barrel for the next fiscal year, a dollar lower than the current year. It also expects prices to rise to only about $67 a barrel in future years. The government looks at outside forecasts and normally budgets an oil price that is “conservative” and a little below the average, Horner said. For the coming fiscal year, he said estimates were wider than normal and the budgeted price is about on consensus. The province also plans to halt contributions to its Heritage Savings Trust Fund, but Horner said that won’t prevent Alberta from its goal of growing the fund from C$31.5 billion in September to C$250 billion by 2050.Oil production, which reached record highs in December, will also grow less quickly. Alberta is projected to produce 4.24 million barrels a day of bitumen and conventional oil in the coming fiscal year, up 117,000 barrels a day. This year, growth is expected to be 133,000 barrels over the prior year. Pipeline capacity is starting to fill up again after the 2024 start of the expanded Trans Mountain system to the Pacific, although further pipeline expansions are planned in the coming years.The deficit is expected narrow to C$7.6 billion in fiscal 2028 and C$6.9 billion in the year after that.The government noted that its exposure to US tariffs was limited, given the exemptions for oil and goods under the existing North American trade deal, which is being reviewed later this year.The oil boom encouraged a surge in migration of people seeking higher-paying jobs and cheaper housing than in other major cities. The population increased 15% in six years, the most of any large Canadian province.But years of anti-Ottawa sentiment in Alberta has sparked a provincial independence movement, with an activist group collecting signatures to try to trigger a referendum that proposes breaking away from Canada.The province says it expects the economy to grow 1.8% in 2026 versus 2.2% last year. Population growth is expected to ease to 1.1% from 2.5% last year after the federal government clamped down on immigration.(Adds finance minister in sixth to eighth paragraphs)Postmedia is committed to maintaining a lively but civil forum for discussion. Please keep comments relevant and respectful. Comments may take up to an hour to appear on the site. You will receive an email if there is a reply to your comment, an update to a thread you follow or if a user you follow comments. Visit our Community Guidelines for more information.