Any news about the province’s finances in recent months has been fueled by infighting in the United Conservative Party and a deeply unpopular premier, the mishandling of the COVID-19 pandemic and the darkening of a fourth wave in Alberta’s health care system. But this year’s budget change—along with rising oil and gas prices in billions of dollars in additional revenue—is staggering.
In late August, the government said higher non-renewable resource revenues were $7-billion more than expected – and combined with other streams of income, this means this year’s deficit would be less than half of the $18.2 billion. Which he estimated in February.
Now, Alberta Finance Minister Travis Toes said more good news about this fall is likely in the 2021-22 fiscal year. In an interview this week, Toez said he “hasn’t been encouraged about the Alberta economy for maybe five or six years.” Higher oil prices, as University of Calgary economist Ron Kneebone notes, mean improved job security and perhaps even new jobs.
Much of this has to do with the demand for crude oil for province exports to the United States. In its February budget, the Alberta government predicted that the North American benchmark price for oil would average US$46 a barrel this fiscal year. In August, he predicted an average of more than US$65 a barrel. This week, the US Energy Information Administration forecast West Texas Intermediate (WTI) prices US$78 per barrel on average by the end of 2021.
To be sure, the government’s initial projections for oil prices were on the low side compared to other forecasts – a long-standing practice of Alberta governments, either out of sense of caution, or out of political hope. Because the final number will exceed low expectations. But this is no small thing: every US$1 increase in the average value of WTI over the entire fiscal year generates an additional $230 million in revenue.
Instead of a celebration, it’s like a sigh of relief—never a good sign. The new billions from non-renewable resource revenue is a reminder of how volatile all this is. Yes, it is good that the budget of the province will not be as bleak as expected. But six years from now – or six months – the picture could be completely different. “We have to remember that we have been here many times before,” said Prof. Niebon said.
Somehow, Alberta needs to learn the lessons of unrest in politics, society, and the environment of being heavily reliant on oil and gas. The Albertans have also had six premieres since Ralph Klein left office—in no small part due to the dramatic ups and downs of the energy sector. Some public sector workers and youth are moving away from a province they see as wild economic swings, or too fossil-fuel-oriented. And the climate-focused energy transition will continue, despite what is likely to be a major bump in the road this winter as consumption of oil, natural gas and coal rises – a reminder that the world does not easily turn away from fossil fuels.
Mr Toes spoke cautiously about the money crunch this year, saying there was still significant volatility in global markets, exacerbated by uncertainty about the pandemic. “And we’re only halfway through the fiscal year,” he said.
The finance minister said he was looking at a long-term outlook and a “sustainable fiscal trajectory”. Living up to the promises of the UCP campaign, Mr Toes said he is still most focused on spending, and reducing per capita public sector costs, while also ensuring that stressed The health care system gets the money it needs, and even a fresh infusion of cash. 2022 budget. He said a detailed review of the province’s revenue streams, including more stable forms of taxation, would be initiated. But, as it happened in February, he still won’t give a timeline for it.
However, he will point to promising developments, such as Dow Inc.’s planned net-zero ethylene plant just outside Edmonton, and the completion of Enbridge Inc.’s Line 3 pipeline replacement project this month – the first successful major expansion of Canada in six years. export potential of crude oil, the key for the province to obtain better prices for oil. Despite the government’s controversial campaign to protect the oil and gas sector – including an investigation targeting environmental activists with reports before the end of this month – Mr Toez said the province was focusing on economic diversification.
However, for the time being, widespread energy shortages have affected Asia and Europe. China is importing record amounts of coal for its power plants. Demand for all types of fuel is increasing as the supply chain tries to resume normalcy. As Jason Kenney’s public acceptance numbers hit new depths, he should expect Alberta history to repeat itself – knowing that the premier’s office is likely to be shut down if non-renewable natural resource revenues are so high. It is very little.
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