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‘I find myself now in the spot where there’s potentially some extra money coming into the system but it’s likely temporary, just like it was at that time,’ said Jason Nixon
By This Article and More by Chris Varcoe Here
When Jason Nixon was first appointed Alberta’s finance minister in June of 2022, oil prices were surging above US$106 a barrel in the wake of Russia’s invasion of Ukraine.
When Nixon returned to the role last Thursday, taking over the portfolio from Nate Horner, the price of benchmark U.S. oil was hovering around $97 a barrel amid a war in the Middle East.
A small variation in those two price points over the past four years doesn’t reflect what actually happened during the stretch — West Texas Intermediate crude opened this year at just $57 a barrel — but it underscores how wild gyrations caused by geopolitics can quickly alter government’s financial picture.
For Nixon, it highlights why the provincial government won’t bank on rising resource revenues to go on a spending spree.
“It’s not lost on me, some of the similarities of that spring to this spring . . . because of a war, frankly, taking place in Europe, and now the situation in the Middle East,” Nixon said in an interview.
“I find myself now in the spot where there’s potentially some extra money coming into the system but it’s likely temporary, just like it was at that time.
“And we have to make sure that we use that to benefit Albertans in the short and long term, but don’t fall into the trap of, sometimes, previous governments using that to create structural challenges in the budget long term.”
It was only three months ago when Horner released the province’s financial blueprint for 2026-27, a document that forecast a dismal $9.4-billion deficit.
The deficit was fuelled, in part, by an expected drop in oil royalties. Natural resource revenues, which make up 18 per cent of all government revenues, were projected to fall by 19 per cent to $13.2 billion.
The budget was based on WTI crude prices averaging $60.50 a barrel, in line with a weak outlook entering 2026. Every $1-a-barrel change in oil prices over the course of the year alters government revenues to the tune of $680 million.
Oil prices spiked above US$100 a barrel after the U.S. war with Iran began in March, disrupting energy flows out of the Strait of Hormuz.
A report this month by the Business Council of Alberta pointed out that if WTI crude averages in the low $80-a-barrel range throughout this year, the province’s projected $9.4-billion deficit would be transformed into a $6-billion budget surplus.
“Being the finance minister in Alberta, it has to be one of the hardest jobs in the country, because how can you plan a budget — never mind (for) the long term, but even just the short term — when so much of the revenue in the province is subject to these volatile swings?” council chief economist Mike Holden said Monday.
With new reports about progress in talks between the United States and Iran to end the war, WTI crude fell Monday to around $90 a barrel, while Brent crude dipped more than five per cent to close at $96.14 a barrel.
Energy experts don’t expect to see a sudden plunge in oil prices back to prewar levels, given the damage done to infrastructure in the Middle East and a drop in global oil inventories.
Meanwhile, Alberta’s economy is outperforming the rest of the country, leading the country in employment growth, noted ATB Financial chief economist Mark Parsons.
“The Canadian economy has struggled, but Alberta is leading the charge,” he said.
“We’re also seeing that this is not a classic energy boom. Despite the fact that oil is near $100, you are not seeing the lift in capital investments that you would typically see during a price boom or a price spike, and so that is keeping growth more moderate than would otherwise be the case.”
For the new energy minister, higher revenues — if sustained — could turn a deficit into a surplus, but he is adamant it won’t lead to a sharp increase in day-to-day operating spending.
The province still has a structural operating deficit, said Nixon, who previously served as minister of assisted living and social services.
“This is not a situation where the floodgates are going to open,” he said.
Nixon said the government recognizes that Albertans are facing affordability challenges, and “we will be having a conversation about how we can potentially use some surpluses to help with that but . . . I don’t want to see a situation where we’re seeing budgets increase in a permanent way.”
While energy prices can be a challenge, the province is putting a chill on business investment with its referendum on the separation issue, said NDP MLA Court Ellingson.
He also noted with the cost-of-living issues facing Albertans, that the NDP has called on the UCP government to temporarily suspend the provincial gasoline tax.
“We’ve not seen the government, writ large, respond to the affordability crisis,” Ellingson said.
“We should be ensuring high-quality public education and public health care. These are the priorities of Albertans, and that is what they’re thinking about now.
“It’s what they were thinking about when oil was $100 . . . It’s what they’re thinking about when oil is $74 or $60.”
Chris Varcoe is a Calgary Herald columnist.
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