How low oil prices are carving a massive hole in Alberta budget

edmontonjournal.com · Feb 27, 2026 · Collected from GDELT

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Or sign-in if you have an account.Oil dropping below the forecast price significantly affects the provincial governments bottom line. Mikael Kjellstrom /Calgary HeraldAlberta’s budget remains on a resource royalty roller-coaster, with oil prices still a major revenue driver for the province — but subdued North American prices mean fewer dollars in the provincial piggy bank.Subscribe now to read the latest news in your city and across Canada.Exclusive articles by David Staples, Keith Gerein and others, Oilers news from Cult of Hockey, Ask EJ Anything features, the Noon News Roundup and Under the Dome newsletters.Unlimited online access to Edmonton Journal and 15 news sites with one account.Edmonton Journal ePaper, an electronic replica of the print edition to view on any device, share and comment on.Daily puzzles, including the New York Times Crossword.Support local journalism.Subscribe now to read the latest news in your city and across Canada.Exclusive articles by David Staples, Keith Gerein and others, Oilers news from Cult of Hockey, Ask EJ Anything features, the Noon News Roundup and Under the Dome newsletters.Unlimited online access to Edmonton Journal and 15 news sites with one account.Edmonton Journal ePaper, an electronic replica of the print edition to view on any device, share and comment on.Daily puzzles, including the New York Times Crossword.Support local journalism.Create an account or sign in to continue with your reading experience.Access articles from across Canada with one account.Share your thoughts and join the conversation in the comments.Enjoy additional articles per month.Get email updates from your favourite authors.Create an account or sign in to continue with your reading experience.Access articles from across Canada with one accountShare your thoughts and join the conversation in the commentsEnjoy additional articles per monthGet email updates from your favourite authorsSign In or Create an AccountorHow do oil prices weigh on the budget, contributing to forecasted deficits of $9.4 billion, $7.6 billion and $6.9 billion over the next three years? Let’s look under the hood.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 Headline News will soon be in your inbox.We encountered an issue signing you up. Please try againNorth American oil is currently trading hands for about US$65 a barrel, but Alberta’s budget forecasts suggest a weak outlook for crude. The problem is there’s a lot of oil sloshing around in global markets, and not enough buyers. The province expects this trend will continue for years.The budget forecasts oil prices will average around US$60.50 per barrel this year and in 2027. It expects stronger demand next year, which should lift prices to more than US$67 per barrel by the 2028-29 fiscal year.But even if that happens — one economist calls the prediction slightly optimistic — prices would still be below what previous Alberta budgets predicted. Alberta Minister of Finance Nate Horner takes media questions before delivering Budget 2026 at the Queen Elizabeth II building in Edmonton on Thursday, Feb. 26, 2026. Shaughn Butts/PostmediaAlberta’s budget is strongly linked to the price of oil, and lower prices mean the government has less money to spend.Royalties that oil and gas companies pay on their production remain a big driver of the Alberta government’s revenues. For this year, every $1 that oil prices drop below the forecasted price would carve about $680 million from the province’s bottom line.That gives you a sense of the stakes. Here’s another way to think about it. Lower crude prices present challenges for Alberta and the provincial budget in several ways. It not only means lower royalty revenues, but it also means lower overall incomes and corporate profits.According to the budget documents, one measure of corporate profits suggests they will fall by three per cent this year before rebounding in 2027. Not great for the economy — or for a government that relies on corporate tax revenue.With oil prices well below the threshold to balance the budget — which ranges from US$74 to US$77 barrels per day over the next two years — Premier Danielle Smith’s government is facing significant challenges to bring spending back into balance.Non-renewable resource revenues are expected to make up around 18 per cent of the province’s total revenue in the next two years, or $13.2 billion.That’s a big chunk of the budget. Because of sagging oil prices, those revenues have fallen sharply just in the past few years. They’re down by 19 per cent since 2024-25, when $16.3 billion was forecast.While oil and gas remains a critical engine of Alberta’s economy, the oilsands are an import source of growth. So it’s no surprise that bitumen royalties make up the largest share of the province’s revenue from resources, at $9.7 billion for 2026-27. But that represents a 24 per cent drop compared to the two previous years.If prices recover as expected, the province expects bitumen royalties to rebound by 2028, reaching nearly $12.8 billion.Still, it all means the province is not collecting as much revenue as it had expected, leading to plenty of red ink.The multibillion-dollar deficits expected over the coming years are a stark contrast to what the United Conservative government predicted half a decade ago — balanced books before the end of 2027. New oil pipelines could boost Alberta’s revenues Getty ImagesA new oil export pipeline could provide a meaningful boost to Alberta’s revenues, given Smith’s ambitions to ship a million barrels per day to overseas markets.That pipeline would require a significant expansion of new production to fill it. But the project is only an idea at this point.A memorandum of understanding between the Alberta and federal government could pave the way for a new pipeline. But the MOU outlines a significant amount of details that must be ironed out first, including agreements on environmental impact assessments and industrial carbon prices.Smith’s government plans to submit an application for a pipeline to the federal government in June. But, so far, no private investors or energy companies have come forward with plans to build it.It means the Alberta government is not banking on a new pipeline for now, even in its budget.Finance Minister Nate Horner said the budget isn’t modelled on future potential.“We model on what we know; so when we’re talking about our future production amounts, those things aren’t considered,” he said.— With files from Reid Southwick, Financial Post Join the Conversation This website uses cookies to personalize your content (including ads), and allows us to analyze our traffic. Read more about cookies here. By continuing to use our site, you agree to our Terms of Use and Privacy Policy.