Canada’s main oil-producing province of Alberta looks set to return to a budget surplus this coming fiscal year, ending seven years of deficit, as surging oil prices swell provincial royalty revenues and provide a boost to Premier Jason Kenney ahead of a spring leadership review.
The oil and gas sector accounts for around 17% of Alberta’s GDP, and a rally in U.S. crude to seven-year highs above $90 a barrel is super-charging the royalties that producers pay to extract the province’s vast fossil fuel reserves.
Some analysts say the windfall, which could exceed the province’s previous oil royalties record of C$10.8 billion ($8.52 billion), will allow Alberta to balance its books and return to a surplus in the 2022-23 fiscal year. The government unveils its budget on Feb. 24.
Last year, Alberta slashed its 2021-22 deficit forecast from C$18.2 billion to C$5.8 billion and since then oil prices have rocketed even higher.
No other Canadian province is expecting a surplus in 2022-23, according to an RBC report released in November.
The expected bonanza is well-timed for United Conservative Party leader Kenney, who slumped in public opinion polls due to what critics describe as his mishandling of the COVID-19 pandemic. He faces a leadership review in April after members of his party called for his resignation.
“He is banking on positive economic news that will hold sway over all the other problems he is facing,” said Duane Bratt, a politics professor at Calgary’s Mount Royal University.
While a balanced budget may help burnish Kenney’s reputation, Alberta still faces economic headwinds. The province has the highest rates of long-term unemployment in Canada, according to a Business Council of Alberta report, and capital investment in the oil and gas sector remains more than 50% below a 2014 peak.
Bratt said he expects Kenney to survive the leadership review – which entails party members voting on whether to retain him as leader – but the premier may face a backlash in next year’s provincial election.
An Alberta government spokesperson said the province is still finalizing calculations on how exactly oil and gas royalty revenue will impact the budget.
BORROWING COSTS IMPROVE
The improved fiscal outlook has already helped improve borrowing costs. The gap between Alberta’s 10-year yield and the yield on the equivalent bond issued by Ontario, Canada’s most populous province, has narrowed from nearly 40 basis points in April 2020 to about 5 basis points.
The previous high point for Alberta royalty revenue was in 2005/06 when the government raked in C$10.8 billion. Since then a prolonged downturn in oil prices starting in 2014 has weighed on Alberta’s finances and prompted many international oil majors to cut their investments in the province.
Now, Alberta is benefiting from changes to the royalty rate formula made in 2017, which translate to higher rates as prices rise. Production from the oil sands are at a record high and a number of major projects have hit “post-payout” in the last year – the point at which a project’s cumulative revenue surpasses the initial investment – and switched to a higher royalty rate.
“We have never in Alberta’s history seen a change this quick or large (in the budget balance),” said Trevor Tombe, an economics professor at the University of Calgary.
“We may very well see royalty revenues higher than any point in Alberta’s history.”
($1 = 1.2726 Canadian dollars)
(Reporting by Nia Williams in Calgary; Additional reporting by Fergal Smith in Toronto; Editing by Matthew Lewis)
TORONTO – Strength in the base metal and technology sectors helped Canada’s main stock index gain almost 100 points on Friday, while U.S. stock markets also climbed higher.
The S&P/TSX composite index closed up 93.51 points at 23,568.65.
In New York, the Dow Jones industrial average was up 297.01 points at 41,393.78. The S&P 500 index was up 30.26 points at 5,626.02, while the Nasdaq composite was up 114.30 points at 17,683.98.
The Canadian dollar traded for 73.61 cents US compared with 73.58 cents US on Thursday.
The October crude oil contract was down 32 cents at US$68.65 per barrel and the October natural gas contract was down five cents at US$2.31 per mmBTU.
The December gold contract was up US$30.10 at US$2,610.70 an ounce and the December copper contract was up four cents US$4.24 a pound.
This report by The Canadian Press was first published Sept. 13, 2024.
OTTAWA – Statistics Canada says wholesale sales, excluding petroleum, petroleum products, and other hydrocarbons and excluding oilseed and grain, rose 0.4 per cent to $82.7 billion in July.
The increase came as sales in the miscellaneous subsector gained three per cent to reach $10.5 billion in July, helped by strength in the agriculture supplies industry group, which rose 9.2 per cent.
The food, beverage and tobacco subsector added 1.7 per cent to total $15 billion in July.
The personal and household goods subsector fell 2.5 per cent to $12.1 billion.
In volume terms, overall wholesale sales rose 0.5 per cent in July.
Statistics Canada started including oilseed and grain as well as the petroleum and petroleum products subsector as part of wholesale trade last year, but is excluding the data from monthly analysis until there is enough historical data.
This report by The Canadian Press was first published Sept. 13, 2024.
TORONTO – Canada’s main stock index was up more than 150 points in late-morning trading, helped by strength in the base metal and energy sectors, while U.S. stock markets were mixed.
The S&P/TSX composite index was up 172.18 points at 23,383.35.
In New York, the Dow Jones industrial average was down 34.99 points at 40,826.72. The S&P 500 index was up 10.56 points at 5,564.69, while the Nasdaq composite was up 74.84 points at 17,470.37.
The Canadian dollar traded for 73.55 cents US compared with 73.59 cents US on Wednesday.
The October crude oil contract was up $2.00 at US$69.31 per barrel and the October natural gas contract was up five cents at US$2.32 per mmBTU.
The December gold contract was up US$40.00 at US$2,582.40 an ounce and the December copper contract was up six cents at US$4.20 a pound.
This report by The Canadian Press was first published Sept. 12, 2024.
