The price of oil is dipping below the United Conservative government’s expectations for the budget year.
Critics say this could cause some financial issues for the province, including the possible depletion of its projected surplus.
“The UCP could already be in a deficit, and if they aren’t now, just a slight drop in the price of oil means that they will be for sure,” NDP leader Rachel Notley said at a news conference Wednesday.
In its latest budget, the government projected the price of West Texas Intermediate (WTI) to average US$79 per barrel.
Through the week of June 25, the price dropped to a low of US$67 per barrel.
The average price since the fiscal year began has been around US$74 per barrel.
ATB (Alberta Treasury Branches) predicts the price of oil to rebound to an average of US$76 per barrel by the end of the fiscal year.
The NDP says despite that increase, it could still spell trouble for the province.
“Even if that’s the case, we’re short because we are as far along as we are, they now need it to go up to $81 per barrel. So, $76 means we’re out,” Notley said.
“They don’t have the money, they claimed they did in the election, they are coming up against a deficit, and they need to explain to folks how they’re going to manage it.”
In a statement to Global News, the government dismissed the NDP’s warnings.
“When it comes to the economy, the NDP don’t [SIC] have a leg to stand on,” Finance Minister Nate Horner said.
“We recognize the volatility of oil prices which is why we introduced a fiscal framework that gives us the flexibility to meet Albertan’s needs while still providing for the needs of today and saving for the future.”
The UCP’s pre-election budget released in February projected a $2.4-billion surplus.
Economist Moshe Lander says oil prices could still rebound but if they don’t, then he believes that surplus could be depleted.
“All is not lost yet, but usually give or take let’s say for every dollar they fall short of their prediction, that’s usually somewhere in the neighbourhood of one or two billion dollars in lost revenue,” Lander told Global News.
The UCP passed its fiscal framework earlier this year which prevents the province from running a deficit.
Lander says that, combined with Premier Danielle Smith’s campaign promise to put any future tax increases to a referendum, and the province painted itself into a corner that it didn’t need to.
“When you make that type of voodoo economics, you’re not leaving yourself a lot of wiggle room. The reality is there’s nothing wrong with deficits and there are other ways to deal with a situation beyond just tax hikes,” he explained.
Horner is set to prevent the 2022-23 year-end numbers Thursday morning.
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