The price of oil is falling below the expectations of the United Conservative government for the budget year.
This could potentially lead to financial challenges for the province, including the depletion of its projected surplus, according to critics.
“The UCP may already be facing a deficit, and even a slight drop in oil prices will undoubtedly push them into one,” said NDP leader Rachel Notley during a news conference on Wednesday.
In the latest budget, the government anticipated an average price of US$79 per barrel for West Texas Intermediate (WTI) oil.
However, the price dropped to a low of US$67 per barrel during the week of June 25, and the average price since the fiscal year began is around US$74 per barrel.
Alberta Treasury Branches (ATB) predicts that the price of oil will rebound to an average of US$76 per barrel by the end of the fiscal year.
Despite this increase, the NDP warns that it could still create problems for the province.
“Even if that’s the case, we’re still short because of our current position. We would need the price to reach $81 per barrel to avoid trouble. So, $76 means we’re out,” explained Notley.
“They don’t have the money they claimed to have during the election. They are facing a deficit, and they need to explain how they plan to manage it,” she added.
The government dismissed the warnings from the NDP in a statement to Global News.
“When it comes to the economy, the NDP don’t have a leg to stand on,” said Finance Minister Nate Horner.
“We acknowledge the volatility of oil prices, which is why we have implemented a fiscal framework that allows us to meet the needs of Albertans while also saving for the future,” he added.
The pre-election budget released by the UCP in February projected a $2.4-billion surplus.
Economist Moshe Lander believes that if oil prices do not rebound, this surplus could be depleted.
“All is not lost yet, but typically for every dollar they fall short of their prediction, the province loses somewhere between one and two billion dollars in revenue,” Lander explained to Global News.
The UCP passed a fiscal framework earlier this year that prevents the province from running a deficit.
Lander argues that this, along with Premier Danielle Smith’s commitment to hold a referendum for any future tax increases, has limited the province’s options.
“When you rely on this type of ‘voodoo economics,’ you leave yourself with very little flexibility. The reality is that deficits are not inherently bad, and there are other ways to address the situation besides just raising taxes,” he said.
Horner is expected to present the year-end numbers for 2022-23 on Thursday morning.
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