Alberta Banks on Oil Recovery to Drive Growth, Cut DeficitBy
‘Alberta’s economy is set to grow,’ finance minister says
Government projections are based on $55 a barrel oil price
Alberta is betting that the recent dip in oil will be temporary and that higher crude prices will allow the province to shrink its deficit while raising spending.
The deficit will narrow to C$10.3 billion ($7.7 billion) in fiscal 2017-18 from C$10.8 billion in the current fiscal year as economic growth in Canada’s energy province rebounds to 2.6 percent after three years of contraction, according to budget documents released on Thursday.
“Its clear, Alberta’s economy is set to grow,” Finance Minister Joe Ceci said in a speech before the legislature in Edmonton. “Our energy industry is on more solid footing. Drilling is increasing, with twice the number of rigs active compared with this time last year. And jobs are starting to come back.”
The brighter days ahead are predicated on crude prices rising steadily through the end of the decade. West Texas Intermediate crude will average $55 a barrel in the coming fiscal year and rise to $68 by 2020. The projections come after prices tumbled almost 10 percent this month to near $49 a barrel amid a supply glut that persists even as the Organization of Petroleum Exporting Countries cuts output.
“If we can just sort of not look at it daily, as I tend to do, but look at more of a long-term basis, we will see the numbers get to where we want them,” Ceci said at a press conference.
Government revenue from oil and gas development, including royalties and leases, will jump 54 percent to C$3.75 billion as oil-sands production rises, according to the budget. Total spending is set to rise 2.1 percent to C$54.9 billion, and revenue will increase 4.8 percent to C$45 billion.
Hydrocarbons account for one-fifth of Alberta’s gross domestic product and 8.3 percent of government revenue, official figures show. Alberta’s oil sands hold most of Canada’s crude reserves, the world’s third-largest. West Texas Intermediate futures have risen since tumbling to a 12-year low of about $26 a barrel last year, from more than $100 a barrel in 2014, amid surging U.S. production.