Alberta dips into emergency fund amid lower-for-longer oil prices
Finance Minister Joe Ceci delivered the province's first quarter fiscal update this week, giving Albertans some good news and some bad news.
The good news: the economy is doing better than expected, now forecasted to grow 3.1% this fiscal year, revised higher from a previous forecast of 2.6%. The bad news: oil prices are expected to remain "lower-for-longer" taking a $2 billion bite out of royalty revenues.
The province has lowered its expectations for oil prices from US$55 WTI to US$49. For the first quarter of this fiscal year (defined as April to June), oil prices averaged about US$48 a barrel.
Offsetting the lower WTI price is a narrower heavy oil discount, which averaged about US$10 a barrel for the first quarter. However, that lower differential is expected to be temporary, as Syncrude's 350,000 bbl/day Mildred Lake facility returns to normal in Q2 after running at reduced rates for much of the spring and summer.
Among the reasons to be optimistic, the government points to higher drilling activity, an increase in housing starts and non-energy exports through the first half of 2017.
Expectations for Alberta's unemployment rate has also been revised from 8% to 7.8% for the 2017 calendar year.
The 2017/18 deficit remains unchanged at about $10.5 billion, but $250 million has been taken out of the province's $500 million "Risk Adjustment" bucket.