Albertans know all-too-well what it’s like to ride the oil price roller coaster.Like the wind in Calgary, it’s always either too high or too low depending on what’s happening oceans away. That’s the trouble with being price takers and not price makers like Saudi Arabia or even the US — which has morphed from being our largest customer to our fiercest competitor.The US is still the largest buyer of Alberta’s oil, of course, but there’s also a sense that things are different this time. They have to be if we’re going to continue to maintain any semblance of control over our collective destiny.That’s why it’s comforting — but admittedly worrisome — to see how the Alberta Treasury department is handling the prospect of a return to austerity after three years of run-of-the-mill volatility that have actually turned out better than anyone could have imagined coming out of the pandemic.And it could happen again. .In his budget speech, Finance Minister Nate Horner rightly noted that we’ve ALL been down this road before, going back almost 100 years or more. And Alberta has always managed to pull through hard times even stronger.There’s no doubt we will again this time; that much is certain in a world that’s growing more uncertain by the day.As Premier Danielle Smith noted at a press event to sell the budget in Calgary on Friday, there’s a lot of ‘ifs’ baked in to the budget projections: IF Donald Trump’s tariffs are indeed implemented; IF they last for his full term; IF they reduce economic growth; IF the federal government’s climate policies stand.But there are also lots of things that can go right, IF the US is truly interested in buying more Canadian oil; IF data centres materialize in Alberta as planned; IF there’s a new federal government in Ottawa this spring; IF newcomers continue to choose Alberta’s low tax policies to raise families and build homes..That’s why Horner’s budget steers the best possible course of action by planning for the worst but leaving enough hope for any upside should the macro and microeconomic factors turn out to be better than expected.It’s better to be safe than sorry. But life still has to go on.That’s why banking on a North American oil price of USD$68 seems reasonable under the circumstance. Horner admitted it’s about $1 lower than most analyst estimates. The government’s breakeven number is about $72, so it’s in the ball park.Ralph Klein proved it was always better to under promise and over deliver. It’s what got Alberta out of what was seen to be a generational debt at the time and it could happen again..The upshot is that the price sensitivities have been magnified exponentially since those days; every dollar to the upside is a whopping $750 million to the bottom line. Even a modest swing in the oil price can erase that $5.2 billion debt in record time.Meanwhile, Horner has managed to squirrel away enough to deliver tax cuts and stash some away in the Heritage Fund for that inevitable rainy day. Although the clouds are gathering, it’s nowhere near a full force gale. That may indeed come, but for now the UCP government is managing to hold a steady course without abandoning ship altogether.Hopefully Albertans, who have seen this movie before, will be able to hang on long enough for an inevitable soft landing in the months to come. And come out stronger for it.Fingers crossed, for sure. But at least we’re not banking on only luck this time.
Albertans know all-too-well what it’s like to ride the oil price roller coaster.Like the wind in Calgary, it’s always either too high or too low depending on what’s happening oceans away. That’s the trouble with being price takers and not price makers like Saudi Arabia or even the US — which has morphed from being our largest customer to our fiercest competitor.The US is still the largest buyer of Alberta’s oil, of course, but there’s also a sense that things are different this time. They have to be if we’re going to continue to maintain any semblance of control over our collective destiny.That’s why it’s comforting — but admittedly worrisome — to see how the Alberta Treasury department is handling the prospect of a return to austerity after three years of run-of-the-mill volatility that have actually turned out better than anyone could have imagined coming out of the pandemic.And it could happen again. .In his budget speech, Finance Minister Nate Horner rightly noted that we’ve ALL been down this road before, going back almost 100 years or more. And Alberta has always managed to pull through hard times even stronger.There’s no doubt we will again this time; that much is certain in a world that’s growing more uncertain by the day.As Premier Danielle Smith noted at a press event to sell the budget in Calgary on Friday, there’s a lot of ‘ifs’ baked in to the budget projections: IF Donald Trump’s tariffs are indeed implemented; IF they last for his full term; IF they reduce economic growth; IF the federal government’s climate policies stand.But there are also lots of things that can go right, IF the US is truly interested in buying more Canadian oil; IF data centres materialize in Alberta as planned; IF there’s a new federal government in Ottawa this spring; IF newcomers continue to choose Alberta’s low tax policies to raise families and build homes..That’s why Horner’s budget steers the best possible course of action by planning for the worst but leaving enough hope for any upside should the macro and microeconomic factors turn out to be better than expected.It’s better to be safe than sorry. But life still has to go on.That’s why banking on a North American oil price of USD$68 seems reasonable under the circumstance. Horner admitted it’s about $1 lower than most analyst estimates. The government’s breakeven number is about $72, so it’s in the ball park.Ralph Klein proved it was always better to under promise and over deliver. It’s what got Alberta out of what was seen to be a generational debt at the time and it could happen again..The upshot is that the price sensitivities have been magnified exponentially since those days; every dollar to the upside is a whopping $750 million to the bottom line. Even a modest swing in the oil price can erase that $5.2 billion debt in record time.Meanwhile, Horner has managed to squirrel away enough to deliver tax cuts and stash some away in the Heritage Fund for that inevitable rainy day. Although the clouds are gathering, it’s nowhere near a full force gale. That may indeed come, but for now the UCP government is managing to hold a steady course without abandoning ship altogether.Hopefully Albertans, who have seen this movie before, will be able to hang on long enough for an inevitable soft landing in the months to come. And come out stronger for it.Fingers crossed, for sure. But at least we’re not banking on only luck this time.
