In a year dealing with a global pandemic and a historic oil price crash, Alberta’s budget was released last week with an $18.2 billion deficit, though offered prosperous times in the future.
Getting out of the pandemic is first priority, as it has decimated the province. By controlling the virus and outbreaks, oil and gas activity can continue. The vaccine rollout and potential high demand for oil and gas products coming out of the pandemic play into the province’s hand.
Finance Minister Travis Toews is forecasting the economy to reach pre-COVID levels by 2022, a year earlier than expected.
The oil and gas sector has an important part to play in Alberta’s economic recovery. The industry has shown its ability to bounce back from hard times in the past and is showing its resilience once again. Continuing along the path of innovation in the sector creates jobs and brings in much-needed revenue.
Due to representing nearly 30% of economic activity and providing well over 400,000 jobs, the sector continues to be the backbone of the province and will be needed more than ever moving forward.
While the budget presumes conservative oil prices of $46 per barrel for the fiscal year, if oil stays above $60 like it currently is, this helps ease the deficit. Revenue is forecast to grow nearly 8% over the following two years, eclipsing $50 billion in 2023-24
With a stable, and potentially increasing price in oil, resource revenues are a factor in a rebounding deficit.
The future of pipeline projects such Trans Mountain and Coastal GasLink are also a wildcard and could help expedite economic recovery and increase the price of oil and royalties received, as well as ensure Alberta producers don’t sell their resources at a discount.
On Alberta Energy Regulator’s website, they mention new and proposed pipeline projects, while also talking about projects such as Enbridge’s Southern Lights pipeline, Plains Midstream’s Rangeland pipeline that are important for the province and sector’s economic health.
While the budget has unearthed alarming numbers for the province and its citizens, the oil price rebound and getting out of the pandemic are causes for optimism in a time when it is needed most.