From deficit to surplus? Alberta’s bleak budget outlook ‘changed dramatically’ as oil prices rise

Alberta’s fiscal outlook has shifted since the province tabled its budget in February, with higher-than-expected oil prices putting the province on track to erase a projected $9.4-billion deficit and potentially finish the year with a surplus.

“It’s changed dramatically,” said Trevor Tombe, an economics professor at the University of Calgary.

When then-finance minister Nate Horner introduced Alberta’s 2026 budget, it estimated West Texas Intermediate (WTI), the North American benchmark crude, would average $60.50 US per barrel during the fiscal year. 

Instead, oil prices have spent much of the spring and summer over the $70 US range, even topping $100 US a barrel amid heightened tensions between the United States and Iran. 

“As it looks right now, we are on track for a pretty modest surplus of something on the order of about $5 billion, if this high, $70 per barrel price holds,” Tombe said. 

Tombe said that represents roughly a $14-billion swing in the province’s finances in just a few months.

The province’s finances remain closely tied to oil prices because resource royalties account for a large share of government revenue used to fund public services.

“The budget is incredibly sensitive to every $1 change in the price of oil,” Tombe said.

According to the budget, every $1 shift increases provincial revenues by roughly $680 million over a full fiscal year. 

The improved outlook comes as the United Conservative government has announced a $100 affordability rebate for Albertans to help offset higher gasoline prices as oil prices have climbed. 

Surplus possible, but not guaranteed 

Economists caution it’s far too soon to assume Alberta will finish the fiscal year in the black.

“A surplus depends both on revenue and on spending,” Tombe said.

“We’ve had this affordability measure, for example. We also might have decreases in revenue elsewhere. The world’s an uncertain place. Trade disruptions with the United States are a negative for Alberta as well. Nothing is guaranteed until the end of the fiscal year.”

Charles St-Arnaud, chief economist for Servus Credit Union, said it’s clear the improvement in the fiscal situation in Alberta is “100 per cent due to higher oil prices.”

“Yes, the Alberta economy is doing relatively well compared to the rest of the country, but it’s not what is driving us to have to swing from a relatively big deficit to a big surplus,” he said.

The province said it expects Alberta’s fiscal position to strengthen as higher oil prices boost resource revenues, but remains cautious.

“Given the volatility of oil markets and Alberta’s continued economic growth and success, we anticipate improvements from the projected $9.4 billion deficit in Budget 2026,” said Juliana Rodriguez, press secretary for Finance Minister Jason Nixon, in a statement.

“However, we have only been in this fiscal year for just over three months, and we cannot base projections for the entire 2026–27 fiscal year on recently elevated oil prices.”

She said the province would update its projections, if necessary, in its next quarterly report at the end of August. 

Volatile markets could change the picture

Tombe said the biggest risk remains the volatility of oil markets.

“They’ve risen over the past few months. They could very well fall over the next several months.”

If oil prices average below about $68 US a barrel for the rest of the fiscal year, Tombe said Alberta would end the year back in a deficit.

“Nothing is guaranteed in terms of the current fiscal outlook for the province. So we really shouldn’t be counting our fiscal chickens before they hatch next year.”