It’s shaping up as a perfect storm — the kind economists and opposition critics have been warning about.
That’s because oil prices tumbled again Monday as markets reacted to OPEC+’s surprise decision to ramp up production in a move that threatens to cost Alberta billions in lost revenue and deepen concerns about a looming global recession sparked by escalating US trade tensions.
Brent crude dipped below USD$60 a barrel, while US benchmark West Texas Intermediate (WTI) fell more than 2% to around $57, the lowest level since the pandemic.
Goldman Sachs slashed its oil price forecasts for the third time in a month after the cartel — led by Saudi Arabia and Russia — announced it will increase output by another 411,000 barrels per day (bpd) in June, echoing a similar hike for May.
Goldman now expects WTI to average $56 for the remainder of 2025 and $52 in 2026.
For Alberta, a non-OPEC price-taker whose budget is built on a $68-per-barrel WTI forecast, the implications are severe.
Each $1 drop in WTI costs the province approximately $750 million in lost revenue. That means if prices remain at current levels, the province could see a revenue shortfall exceeding $7.5 billion — blowing a hole in Premier Danielle Smith’s 2025 budget just weeks after it was tabled.
“I tend not to panic on seven days’ worth of data,” Smith said at the time. “But we knew we were going to see a lot of volatility.”
That volatility is being blamed squarely on growing global economic uncertainty, much of it tied to US president Donald Trump’s chaotic trade and tariff policies.
Gold prices surged past $3,200 an ounce Monday — a classic sign of investor anxiety — as markets digested the impact of Trump’s sweeping 10% tariffs on all imports, which took effect April 5.
The US economy already appears to be stumbling, shrinking by 0.3% in the first quarter of 2025. Economists say the contraction — driven by a 41% surge in pre-tariff imports — may be the first sign that Trump’s trade war is backfiring.
Recession odds are rising: JPMorgan now pegs the risk at 60%, while Goldman Sachs has upped its estimate to 45% in a note appropriately titled: ‘There Will be Blood’.
Goldman also warned that if OPEC+ continues to unwind production cuts while demand weakens, Brent could plunge to the $40 range, with WTI potentially dropping into the mid-$30s by 2026 — levels far below what most North American producers can withstand.
Many US shale operations are already uneconomic below $60, and the market reaction has been swift. American shale boss Bryan Sheffield called the current state a “blood bath” and urged drillers to cut back immediately.
Alberta, heavily reliant on energy royalties, now finds itself caught in the geopolitical crossfire.
Smith is expected to address the crisis in a televised speech later Monday, where observers anticipate she will reference not only the state of trade relations between Canada and the US but also tensions with Ottawa.
When he tabled the budget, Finance Minister Nate Horner said he had spoken with the Bank of Canada and federal counterparts, but few solutions were forthcoming.
“Everyone is in a hunker-down-and-weather-through-this approach.”
Smith, who has hailed Trump’s tariff plan as a “win” for Alberta — citing zero tariffs on energy and food — has been more guarded since Mark Carney was elected prime minister last week.
Asked if the province would roll out support for laid-off workers or struggling businesses, Smith suggested it’s Ottawa’s responsibility. Opposition leader Naheed Nenshi disagreed.
“We’re in big trouble,” Nenshi said. “The price of oil is down $10, and that could mean an additional $6 to $10 billion deficit for Alberta. Celebrating that deal was clearly a mistake.”
“We will see job losses. Small and medium businesses will close. And Alberta has a role to play in helping people now.”
In the 2025 budget, Alberta’s own economists warned that “stormy skies” were on the horizon. Barely a week later, the storm has arrived.
In Smith’s address, Albertans will be watching closely for signs that their government is prepared to act — or whether it’s bracing for a deeper economic downturn driven by forces far beyond its control.
Stay tuned.