As the price of West Texas Intermediate (WTI), the benchmark North American crude oil, fell to a four-year low earlier this week, sliding to around US$55 a barrel, there continues to be a steady downward trend in oil prices that analysts say is likely to persist as global oil inventories build through 2026.That drop is of particular concern in Alberta, where government revenues are heavily tied to oil and gas royalties.However, economists have noted that Alberta is somewhat insulated from additional shocks this time around because the price gap between WTI and Western Canadian Select (WCS) remains relatively narrow.Rather than the steep discounts seen in past downturns, the WTI–WCS differential is currently sitting between about US$11 and US$13 a barrel.Premier Danielle Smith acknowledged that short-term price swings pose challenges for governments but said she remains optimistic about Alberta’s long-term energy prospects earlier this month.“Short-term price fluctuations are painful for governments,” Smith said.“But I remain very confident that when we look forward five, ten, 15 years, that there’s going to be more Alberta energy on the market.”.Alberta’s budget may withstand oil price slump better than feared — for now.A spokesperson for the Ministry of Treasury Board and Finance told the Western Standard that Alberta’s oil price forecast already reflects expected weakness through the remainder of the fiscal year and that the government recognizes external factors such as geopolitical tensions, tariffs, and shifts in energy demand can impact the market price of oil.“It is normal for prices to fluctuate throughout the year. Our oil price forecast from the second quarter reflects the weakness we expect to see through the end of the fiscal year,” the spokesperson said.“Our government took a careful, measured approach to building Budget 2025 and updating our resource revenue forecast through the quarterly fiscal updates. We use conservative assumptions and realistic, built-in contingencies to help deal with the expected revenue volatility.”The statement added that deliberations for Budget 2026 are underway and that updated forecasts will be released in February.Industry groups say the downturn is already influencing business decisions.Gurpreet Lail, president and CEO of Enserva, said in a statement that the current price environment was anticipated in the organization’s State of the Industry report.“Ups and downs in WTI and WCS prices are part of the energy business,” Lail said.“Major forecasters do not expect a meaningful price recovery in the near term.”Lail said slower global economic growth and rising oil production worldwide are expected to moderate demand in 2026, keeping prices under pressure and dampening investment, drilling activity, and service-sector demand in Alberta.As a result, service companies are focusing on efficiency, cost control, and retaining skilled workers.She noted that natural gas presents a more positive outlook, with LNG capacity coming online and improved market access expected to support increased activity and job opportunities in the coming years..WIECHNIK: Alberta’s oil patch is one coup away from crisis.Dr. Trevor Tombe, a professor of economics at the University of Calgary and director of fiscal and economic policy at the School of Public Policy, said firm revenues and royalties respond immediately to price changes, while employment is far less sensitive than it once was.“Most of the facilities that exist in the province have costs that are actually quite low, and so despite low oil prices, these are still profitable to operate,” Tombe said to the Western Standard.“Employment really isn’t responsive anymore to these movements in oil prices the way it was in the past.”Tombe believes a larger concern, could be the provincial budget.He estimates that every US$1-per-barrel drop in oil prices reduces Alberta’s bottom line by roughly $750 million.With WTI opening at US$56.79 on Thursday and oil currently trading well below the US$68-per-barrel assumption used in the 2025 budget, the fiscal outlook has soured slightly going into the new year.Tombe said the province had been hoping for prices around US$71 a barrel next year, but if current conditions persist, that gap could amount to roughly a US$16-per-barrel shortfall — translating into a hit of about $12 billion.“These are difficult choices for any government,” Tombe said.“If prices stay low for a prolonged period, something has to give — either spending, taxes, or higher public debt.”
