Oil pumpjacks in a farmer’s field near Calgary in November, 2025. The Alberta government had projected a $4.1-billion deficit for the current fiscal year.Todd Korol/Reuters
When Alberta Finance Minister Nate Horner released the annual budget just over a month ago, he warned of “tough choices” ahead, painting a grim picture of the province’s financial health.
But in a place where resource royalties dictate finances, a lot can happen in a month – and it has.
Enduring a prolonged stretch of depressed oil prices, the government had projected a $4.1-billion deficit for the current fiscal year and a shortfall more than double that, at $9.4-billion, for the next.
When the fiscal year comes to a close next Tuesday, that $4.1-billion shortfall could be cut in half, said Trevor Tombe, economics professor with the University of Calgary.
“It’s been a massive turnaround in Alberta’s financial situation,” said Dr. Tombe.
That turnaround can be directly attributed to the sudden rise in oil prices, triggered by the war in the Middle East and the subsequent closure by Iran of the Strait of Hormuz, a vital route for energy shipments on the global market.
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No other provincial government is as sensitive to oil prices as Alberta: Every $1 change in the per-barrel price of oil has an approximate $700-million effect on the province’s bottom line. Ever since the U.S. and Israel attacked Iran on Feb. 28 – two days after Alberta posted its budget – benchmark West Texas Intermediate oil prices have surged to average about US$90 a barrel after languishing near US$60 for much of the previous 12 months, Dr. Tombe said.
Alberta’s rapidly altered finances underline how the province stands apart from its counterparts as they each struggle with unpredictable economic conditions sharpened in the past year by U.S. President Donald Trump’s trade war and tariff threats.
On Thursday, Ontario was the latest province to publish a red-ink budget, citing a sluggish economy hampered by U.S. tariffs, tabling a $13.8-billion shortfall for the next year. B.C. also partly blamed its record $13.3-billion deficit projection on tariff turbulence.
Alberta did not have tariffs alone to blame in tabling its deficit last month. It has the lowest exposure to U.S. levies among all provinces, according to its fiscal plan, with an estimated 1- to 2-per-cent effective tariff rate.
Alberta is also the only jurisdiction – save for the federal government, which collects corporate-income taxes – that substantially benefits from high oil prices.
A pump in downtown Calgary on March 6. No other provincial government is as sensitive to oil prices as Alberta.Todd Korol/The Globe and Mail
Dr. Tombe said his calculations show Alberta has posted between $40-million to $60-million daily surpluses since the war began, based on each day’s average price of crude oil. If Thursday’s trading activity on West Texas Intermediate futures is accurate, he said Alberta would flip its projected $9.4-billion deficit in the coming year to an approximately $4-billion surplus.
“The size of the sensitivity [in Alberta] is way larger than other jurisdictions,” Dr. Tombe said.
Marisa Breeze, press secretary for Mr. Horner, said in a statement that the province is expecting a reduced deficit for the current year, but not a surplus. The province’s annual report will be published at the end of June.
Alberta hasn’t adjusted its expectations for the upcoming fiscal year, she wrote. The government’s $9.4-billion deficit is driven by a US$60 WTI forecast for 2026-27.
“We do not plan based on short-term fluctuations in the market,” she said.
Whipsawing oil prices and a fluctuating financial situation are nothing new for Alberta. The latest budget triggered renewed discussions about implementing a provincial sales tax as an option to relieve Alberta from its reliance on resource revenues.
Trevor Harrison, a retired political science professor with the University of Lethbridge, said Premier Danielle Smith’s UCP government will likely be allowed to sidestep conversations around stabilizing its revenue sources if oil prices remain high.
“It’s going to disappear the same way it always disappears when the money starts to flow in. The government will have no incentive to bring about taxes,” he said.
Ms. Smith has pointed to the provincial sovereign wealth fund – Alberta’s Heritage Savings Trust Fund – as a future source of stability in her attempt to grow it to $250-billion by 2050. The fund was valued at nearly $32-billion at the end of last year, but the province said last month it would not make any contributions in the coming year given the financial outlook.
Alberta could face fiscal pressure in another way if energy prices remain high. Under the province’s Fuel Tax Relief Program, the 13-cents-per-litre gas tax could be lifted in July if the average price of WTI exceeds US$90 a barrel for 20 trading days heading towards the end of the next quarter, stripping Alberta of that revenue stream.
The province may also face pressure to provide cash transfers to residents if energy prices result in mounting inflation, Dr. Tombe said. But either scenario would have a minimal impact in contrast to the massive influx of resource revenues.
“[Alberta] would still be a huge net winner here,” he said.