Alberta-governing NDP’s pledge to get the province off the proverbial ‘royalty roller-coaster’ is simply an empty promise. In conjunction with tabling their second straight $10+ billion deficit, Alberta’s NDP forecasts to reduce future deficits from $10.3 billion this year to just over $7 billion by 2019/20. One would assume this would be based on solid fiscal management: preferably curtailing spending or at least keeping growth in line with population or even inflation. But upon closer examination, the NDP has gambled Alberta’s economic health on the price of oil.
Hat-tip to University of Calgary professor Trevor Tombe, who summarized NDP projections using a couple of simple charts:
Government oil price forecast is a bit optimistic compared to futures prices. About ~$18/bbl higher in 2019/20. #ableg pic.twitter.com/MCoXTOZkUE
— Trevor Tombe (@trevortombe) March 16, 2017
To illustrate effect of oil prices, each $1/wti –> $310M to govt budget. If prices evolve w/ futures prices, deficit doesn't shrink. #ableg pic.twitter.com/hRdLy41etm
— Trevor Tombe (@trevortombe) March 16, 2017
So, it seems fair to say *all* of the expected deficit reduction is coming from the optimistic price of oil. Interesting. #ableg
— Trevor Tombe (@trevortombe) March 16, 2017
So as clearly demonstrated, the NDPs plan to reduce the deficit relies 100% on the price of oil. Time after time, Alberta NDP leadership has called out past Alberta government’s guilty of ‘not diversifying the economy’ or ‘relying on one commodity for revenue’–however, their budget and forecasts are solely dependent on the price of oil.
Ideally, Alberta should be budgeting for $0/bbl oil–all royalties should go to the Heritage Fund or be separated from operating and capital expenditures–but that would involve fiscal restraint, which is against NDP religion. Furthermore, even if there is oil price appreciation, who’s to say NDP future spending does not also increase?
