As concerns rise over high oil prices due to the war in Iran, Canada’s oil-producing provinces could actually see revenue increase.
The price for a barrel of crude topped USD$73 in the early morning on Monday, up from less than $64 on Feb. 26. As of Tuesday afternoon, that number had jumped to about $74.83.
For Alberta, which has projected a $9.4-billion deficit for the 2026-27 fiscal year, the oil price shift could mean a decrease in that large number.
“If prices stay in the low 70s, our deficit could drop into the $3 billion range and that would be helpful,” said Richard Masson, former chief executive officer of the Alberta Petroleum Marketing Commission.
“But we don’t know what’s going to happen and so I wouldn’t count on that yet.”
In its budget, Alberta had projected West Texas Intermediate — considered the lifeblood benchmark oil price for the province’s economy — to average $60.50 a barrel in the upcoming fiscal year.
Alberta Finance Minister Nate Horner told reporters when the budget was released that if oil prices stay low indefinitely, the structural deficit would become “extremely obvious.”
An exact estimate is difficult to predict, but Alberta Premier Danielle Smith told reporters on Monday a change is possible from the $4.1 billion deficit estimated for the current fiscal year.
“I suspect that rather than a $4.1 billion deficit that we were projecting in the budget, it might be somewhat less than that,” Smith said.
A day later, Horner told reporters a sustained period of high oil prices would help.
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“An extra month at elevated prices would have a dramatic impact,” he said Tuesday. “I don’t want to speculate on how much that will change things for this year, but we know it will help, we know we’re on the right side of it.”
It would depend how long the increased prices last, Horner said, and if it stays at that level it would “help the books.”
University of Calgary economist Trevor Tombe said it’s common that when a major item produced by a province sees the price go up, it’s a good economic story.
“At the end of the day, a lot of the resources we produce in Canada are owned by provincial governments,” he said.
“So when the value goes up, that does mean more revenue to the government and the effect can actually be enormous.”
Tombe said in the case of Alberta, every $1 per barrel change is equal to about $680 million to the government’s bottom line.
With the price of $74 per barrel of crude about $14 above the provincial estimate, it could equal $30 million per day to the government’s bottom line.
He added if that held for the month of March, that could equal up to $1 billion for the final month of the 2025-26 fiscal year.
“That basically means that if it holds, of course for an entire year, and who knows what the future holds, but if it holds it may very well have a balanced budget,” Tombe said.
Next door in Saskatchewan, another oil-producing province, the impact may differ.
In last year’s budget, the province estimated oil and natural gas revenue at $1.1 billion. It also estimated a barrel of oil at US$71 in the 2025-26 budget.
“The price of oil has jumped in the last few days, nobody anticipated that a month ago,” said Saskatchewan Finance Minister Jim Reiter.
Reiter noted to reporters the province has tried not to rely too much on natural resources and that remains the goal.
Tombe noted to Global News that the province is less reliant on oil compared to Alberta, but he estimated an equivalent change for Saskatchewan would amount to about $800 million.
“Oil prices matter for Saskatchewan, but the size of the effect is much, much smaller than in Alberta which means … they don’t face the same kind of volatile budget that Alberta does,” he said.
Saskatchewan’s finance minister said any budget-specific questions would be deferred until budget day, March 18.
Even though high oil prices could boost provincial budgets, everyday Canadians could still be hit hard both at the gas pump and in their wallet, Tombe cautioned.
“When the price of anything that we buy goes up, that does lower our purchasing power,” he said. “The increase in oil prices that we’re seeing now, if that lasts, then we may very well see inflation rise.”
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