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

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(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.

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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.

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It’s partly a revenue issue: royalties from bitumen are set to drop to C$9.7 billion, down 44% in two years.

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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.

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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. 

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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.

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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. 

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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.

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The deficit is expected narrow to C$7.6 billion in fiscal 2028 and C$6.9 billion in the year after that.

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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.

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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.

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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.

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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.

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