Premier Prentice on the Alberta Economy
With record low oil prices Premier Jim Prenticespoke candidly to the Calgary Chamber of Commerce last Friday and both myself and our Senior Manager of Surface Land were in attendance. Prentice said that that the government still forecasts a surplus for the end of March, marking the end of the 2014/2015 fiscal year and Alberta poised to end the fiscal year in the black. The budget, prepared last March, was based on the forecast of West Texas Intermediate oil at an average price of $92 per barrel. For the first six months of the year this number sat much higher, around $100 a barrel.
Since the summer prices in oil have dropped 35% posing some issues for the province.
“Last year the Alberta government earned more than $9 billion from its royalties, amounting to about 21 per cent of the province’s budget. With every dollar drop in the price of oil per barrel over a year, Alberta loses directly over $250 million in revenue.”
“For the remainder of this year, we will be basing our forecasts in the $65 to $75 per barrel range, and the implications of this are important. Oil prices of $75 per bbl represent a very significant reduction in terms of the government’s revenues in the province of Alberta, especially if the price remains this low for an entire year”.
Prentice also stated that to counteract this lost revenue the government will be “being prudent in our public expenditures”, however promising that cuts would not be made to core services in health, education and social services. He noted that “to deal with the implications of not just $75 oil at this point, but sub-$75 oil, there will be consequences for all Albertans.”
Looking to the future of the province Prentice affirmed that now is the time to value the long term plan, looking towards TransCanada Corporation’s East Energy Project. Alberta’s access to tide waters will be fundamental in producing a more stable budget, less affected by volatile oil prices.
“Tidewater access — whether east, west, south or north — matters. It is essential, and I have previously described it as a national imperative in this country, and I believe it is. Our government is very focused on this. We will continue to build partnerships with Canadian provinces, with Canadian territories, and with Ottawa to gain support for expanded export and transportation capacity, whether by truck, air, pipeline or rail.”
Although the oil price is concerning we are confident in Alberta’s ability to pull through. There will be implications for all of us who live and work in Alberta however as a province we are resilient and as Prentice said “you don’t win a bigger lottery than to be an Albertan”. Our focus at Britt Land we will be managing our spending while seeking ways to increase productivity. We know that we’ll weather this storm as we too are innovative, resilient and will seek out ways to create our own success.