Alberta’s energy industry, government watch nervously as oil prices hit 4-year low

With oil prices plunging to their lowest level in four years, both the energy industry and governments that depend on energy royalties are watching nervously.

“This isn’t a crisis for the industry yet. The bigger problem will be for the Alberta government in its deficit.”

That’s how Richard Masson, an executive fellow at the University of Calgary’s School of Public Policy, sums up the impact of plummeting oil prices that fell to around $57 U.S. per barrel on Monday — the lowest in four years.

While the low prices have also led to drop in gasoline prices, it is the broader economic impact that both industry and government are concerned about.

The government of Alberta forecast a deficit of $5.2 billion for this fiscal year under the expectation that oil prices would average about $68. per barrel of west Texas crude (WTI) — and that’s without knowing the impact of U.S. President Donald Trump’s tariffs on the Alberta economy.

While the selling price for most Canadian oil, known as western Canada select (WCS) — which normally sells at a discount compared to WTI — has narrowed in recent months, if the low prices continue, it will put a huge hole in the province’s budget.

Masson estimates for every $1 decline in the price of oil — that lasts one year — it means a $750-million hit to the provincial government’s budget.

“It’s one of those things that puts pressure on every government program, and everything that the government wants to do. When they’re facing bigger deficits than they planned,” said Masson.  “So these are big numbers, $10 billion deficits.”

Asked for a response to the falling oil prices, the office of Alberta Finance Minister Nate Horner emailed a statement to Global News, reading, “we budget for the entire fiscal year and we are currently one month into that year.  The differential (WCS vs. WTI) remains around $9. compared to the budgeted $17. which will offset some of the revenue lost from lower prices.”