Things could get ugly for Alberta taxpayers relying on global oil prices to fund a tax cut for the current fiscal year.
And go south, fast.
That’s because Alberta is a price taker — not a price maker — in global oil markets. Now the global trade war has the potential to be deeper and steeper, and last longer, than even experts expect.
Just ask the people who make the prices: the Saudis.
In a move that underscores the deepening global trade turmoil, Saudi Aramco over the weekend slashed its May oil prices for key Asian buyers by the steepest margin in over two years — a calculated move to protect market share, not generosity.
The state-owned oil giant cut the official selling price (OSP) of its flagship Arab Light crude by USD$2.30 per barrel for Asian customers — its lowest in four months. While price cuts of this kind aren’t unusual, their timing and size are telling.
The cuts come days after OPEC+ unexpectedly tripled its planned production hike and amid escalating global trade tensions triggered by a sweeping package of US tariffs.
This isn’t charity — it’s strategy.
Saudi Arabia, the world’s largest oil producer and home to the most valuable energy company on the planet, trades its crude at a posted price, unlike US benchmark WTI or international Brent which fluctuate on open markets.
That gives Riyadh the flexibility — and power — to use pricing as a geopolitical and economic lever. The last time they slashed prices like this was during the global financial crisis and again during the COVID-19 pandemic.
And with Asian buyers like China and India feeling the sting of tariff-driven slowdowns, Saudi Arabia is preemptively cushioning the blow to keep its most important customers from turning to competitors — namely the US and Canada.
For North American producers, the move is especially ominous.
Unlike Aramco, they need prices closer to $60 per barrel just to break even. With WTI now trading just under that threshold and forecasts slipping lower, the price cut is a direct challenge to competitors already under pressure.
In Alberta, where every US dollar swing in oil prices equals roughly C$750 million in public revenue, the implications are stark: a prolonged dip could tip the province back into deficit territory by 2025 or 2026, even with current production levels.
And though it means motorists can expect to pay less at the pump, it also means taxpayers are on the hook for any future budget deficits. We’re all going to pay, one way or another.
The price cut also signals that Riyadh is preparing for a global recession — or at the very least, a prolonged trade war that slams global growth and energy demand.
The US-China tariff slugfest, compounded by retaliatory measures, has already dented investor confidence and hammered commodity prices across the board. Goldman Sachs now puts the odds of a US recession at 45%, citing tightening financial conditions and deepening policy uncertainty.
No surprise, oil prices have plunged more than 20% in just four trading sessions. The impact is magnified on this side of the border, owing to the fact that the US is still Canada’s largest customer for everything it produces, including 4.3 million barrels per day (bpd) of oil.
A stateside recession is a force multiplier that pushes the needle firmly into the red.
While the US administration has pushed for lower oil prices to ease inflation and press Russia economically, the unintended consequence is a destabilized energy market.
Trump’s tariff blitz, though aimed at balancing trade, is driving fear of a global demand slump. Aramco’s price cut — combined with OPEC+’s surprise production boost — adds fuel to those fears.
For now, the Saudis are playing the long game: undercutting rivals, solidifying their grip on Asia, and signalling that the global oil landscape is shifting fast.
For producers in Alberta and Texas alike, the message is clear — the days of easy profits are over, and the trade war’s fallout may just be getting started.