Ottawa tables fiscal update boosted by surging oil prices, while industry maintains cautious approach

Surging oil prices are one of the factors that led to a better-than-expected fiscal update from the federal government on Tuesday, but what the future holds for investment in the oil and gas sector remains unclear.

The industry is in a position to invest more, said ATB Financial chief economist Mark Parsons, but he said more detail will likely need to be seen about what will come of negotiations between the federal and Alberta governments, before there’s a major shift in investment.

Until then, Parsons said there will likely be a more cautious, wait-and-see approach toward oil and gas investment.

“Oil prices have spiked, industry sentiment has improved, but we don’t expect large investments in growth capital, new projects until we get clarity on the MOU and whether we’ll have additional pipeline capacity,” said Parsons.

The federal and Alberta governments are still negotiating the details of a memorandum of understanding, or MOU, they signed in November. The two sides already missed the first set of deadlines, included in the energy and climate deal, earlier this year.

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Finance Minister François-Philippe Champagne spoke to media before tabling the government’s spring economic update, which puts the 2025-26 deficit at $66.9 billion — $11.5 billion lower than its November figure. Champagne said Canadians want, ‘at a time where the world is undergoing unprecedented changes, that people at the helm would be fiscally prudent.’

In Tuesday’s update, the federal government saw an $11.5-billion drop to the deficit compared to what it projected in the fall. 

While Parsons noted the deficit is still a large number, he said Prime Minister Mark Carney has identified the right problem to tackle by focusing on trying to attract new investment.

“The fiscal update has identified the right challenges confronting the Canadian economy. It’s just all about execution,” said Parsons.

“Because, so far, we haven’t seen the needle move much on business investment; it’s been flat over the last year. So we do need to see more progress on this front.”

Parsons added that Canada’s fiscal fortunes being elevated partly due to higher oil prices is a reminder of the strong role the country can play in securing global energy security amid economic anxiety brought on by the U.S. and Israel-Iran war.

More skilled workers a benefit to Alberta, says economist

Charles St. Arnaud, chief economist at Servus Credit Union, said Tuesday’s update is in line with what he expected, with Ottawa moving in a marginal but positive direction since the fall budget.

The update pledges $6 billion toward a need for trades workers, including funding for training up to 100,000 skilled trades workers by the 2030-31 fiscal year.

St. Arnaud said the funding could be helpful for post-secondary polytechnic schools in Alberta like SAIT and NAIT, while also meeting a need for more workers to complete future infrastructure projects.

“We have all those infrastructure investments coming up, so we’ll need those workers to build those investments,” said St. Arnaud. 

But he said the update brought forward little to improve affordability for Canadians, with the exception of reduced pension contributions for workers and employers.

“The problem is that there’s not that much we can do for affordability,” said St. Arnaud. 

“A lot of the issue is also that our income needs to grow, and that’s where growing our economy, investing, improving productivity is so important in the long run.”