The Suncor oil refinery on Edmonton's east side.Kaeden Dupre/The Globe and Mail
Alberta is projecting oil prices far beyond the expectations of forecasting agencies, industry and most banks in 2026 and 2027, despite a multibillion-dollar fossil fuel-based wallop that is set to send the province’s budget deep into the red.
Budget 2026, released Thursday, estimates that cash from non-renewable resources will reach $13.2-billion in the 2026-27 fiscal year – roughly 18 per cent of the province’s total revenues. That’s $8.8-billion less than the sector brought in during the 2024-25 fiscal year, and $3.1-billion lower than the province had previously forecast.
The government attributes the nosedive to a couple of factors: lower benchmark oil prices, including West Texas Intermediate, and a wider gap between WTI and the Western Canadian Select price that Canadian producers receive for their product.
Despite Premier Danielle Smith’s recent warning that Albertans must prepare to feel the pinch because of oil prices, the provincial budget paints a much rosier picture than energy watchers do about how much barrels will sell for in 2026 and 2027.
The government’s WTI forecast for 2026 is US$60, for example, compared with the private market average of US$58. (At the low end of the scale, the U.S. Energy Information Administration forecasts US$52, while National Bank is predicting US$68.)
The difference between Alberta and the market widens even further in 2027. The government reckons WTI will hit US$66, while private forecasts average US$60.50.
Asked how confident he is about Alberta’s own oil price estimates, Finance Minister Nate Horner said he has “a lot of trust” in the province’s chief economist, Catherine Rothrock.
“It’s a pretty educated forecast. I’d say she’s got a better track record than industry,” he told media.
Alberta’s outlook does not reflect the commonly bleak view of oil prices among analysts, however.
Alberta Premier Danielle Smith answers questions at a news conference in Calgary last week.Todd Korol/The Canadian Press
At the heart of the depressed oil price environment is a global oil glut, which has significantly imbalanced supply and demand.
Susan Bell, the senior vice-president of oil research at Rystad Energy, said in an interview she expects oil prices to soften over the near term and into 2027 as oversupply dogs the market before a correction begins in early 2028.
Kevin Birn, the chief analyst for Canadian oil markets at S&P Global, puts global supply growth at nearly two million barrels this year. The result will be marked downward pressure on oil prices, he said in an interview, with the global Brent benchmark price hitting US$60 over the course of the year – and WTI even lower.
Then there are the wild cards of the global oil sector, including potential production growth from Venezuela or Libya, and whether U.S. producers – which tend to be more exposed to the effects of low prices compared with Canadian oil sands companies – increase their output.
Voluntary production cuts by OPEC are an unlikely prospect given “there’s not an awful lot of political will for them to do that,” Ms. Bell said.
With all of those factors combined, she called Rystad’s view of near-term pricing “dire.”
“If the balance plays out as it is on paper right now, where we’ve got a glut of about two million barrels a day in 2026, the fundamental view is something that you wouldn’t want to write,” she said.
On the flip side, the world commodity price environment is subject to various geopolitical pressures that can turn on a dime, reducing global supplies.
China could stockpile more crude than it is right now given the current low-price environment, for example. Rystad’s assessment is that the Asian country will stockpile roughly 200,000 barrels a day this year, which Ms. Bell could continue into 2027 because the country’s inventories aren’t yet full.
Then there is the question of what will happen in Iran, which produces roughly 3.3 million barrels of oil per day.
The country is struggling with growing dissent following countrywide protests last month, and U.S. President Donald Trump has repeatedly threatened to attack if negotiations fail on a deal to constrain Iran’s nuclear program. Mideast countries fear an attack could spiral into a new regional war, as the U.S. gathers a massive fleet of aircraft and warships in the region.
Russia could also cut production if sanctions harden in the face of continuing aggression against Ukraine, Ms. Bell said, and U.S. shale producers might reduce output if lower prices put pressure on producers.
Geopolitical pressures could force countries to reduce supply, but Canadian oil sands companies would be unlikely to shrink their output.Victor R. Caivano/The Canadian Press
The oil sands companies that comprise the bulk of Canadian crude production, however, are unlikely to shrink their output.
“We think of Canadian oil sands as baseload oil, because it’s a very inflexible source of supply,” Mr. Birn said. “When oil prices fall, they’re actually incented to produce more because a big chunk of their costs are fixed.”
Alberta’s budget forecasts that non-renewable resource revenue will increase to $16.2-billion in 2027-28 and $16.9-billion by 2028-29.
The government said in the budget that Alberta’s resource-intensive economy “makes it uniquely sensitive to global economic and market conditions.” It plans to conduct a broad review to figure out how to better support sustainable fiscal planning.