Oil price shock pumps millions a day into Alberta while deficits still loom
Every province in Canada is running a deficit of 1 percent of GDP or more, and Ottawa’s own shortfall is widening, even as an oil shock offers Alberta a potential revenue bump.
According to Reuters, the federal government recorded a budget deficit of $26.14bn for the first nine months of the 2025/26 fiscal year, compared with a $21.72bn deficit in the same period a year earlier.
The finance ministry said program expenses rose 3.5 percent on increases across all major categories, while public debt charges fell 0.6 percent because of lower interest rates on treasury bills and on cross-currency swap transactions and other liabilities.
Reuters also reported that year-to-date revenues grew 2.2 percent, largely on higher custom import duties and corporate and personal income tax revenues.
On a monthly basis, Canada posted a surplus of $245m in December, down from a $1bn surplus in December 2024.
Provincial finances point in the same direction.
As per CTV News, most provinces have not yet delivered their 2026–27 budgets, but experts expect the trend of deficit budgets to continue.
University of Regina economics professor Jason Childs told CTV News that Canada faces “a national problem” because governments have moved away from balancing their budgets. He said “every province in this country is running a deficit of one percent of GDP or more.”
Saskatchewan Premier Scott Moe said the province will see a deficit when it delivers the budget on March 18, citing trade uncertainty and increased spending on public services.
“We’re in a challenging time across Canada,” Moe said, adding that no province seems immune to financial shortfalls.
Regina director for the Johnson Shoyama Graduate School of Public Policy, public policy expert Jim Farney, linked Saskatchewan’s revenue pressures to China’s tariffs on Canadian canola and falling oil prices.
He also pointed to higher spending on healthcare, education and highways driven by population growth.
“Healthcare, in particular, is just getting ever more expensive as our population ages, and there’s really no good fix for that,” said Farney.
Based on mid-year updates, Childs suggested Saskatchewan could post a $1bn deficit.
“Yes, we’re going in the wrong direction, but we’re going in the wrong direction slower than everybody else,” he told CTV News.
The same report noted that British Columbia’s budget delivered a record $13.3bn deficit with tax hikes and 15,000 public-sector job cuts.
Nova Scotia projected a $1.2bn deficit that includes cuts to government jobs, grants and operational expenses in the civil service.
CTV News also reported that Alberta’s premier warned of “significant” deficits ahead of that province’s budget.
Childs said about 10 percent of federal tax dollars goes to servicing the country’s debt, money that does not fund public services.
“For the rest of our working lives, we’ll be paying interest on both the federal and provincial debt,” he said.
To get back to balanced budgets, Farney said provinces would need service cuts “that are deep and politically unpalatable” or tax increases, and “neither” option would be popular with voters.
Premier Moe has suggested there will not be service cuts or tax hikes as a result of Saskatchewan’s budget deficit.
In Alberta, the fiscal picture remains deficit-heavy but highly sensitive to the latest oil shock.
According to CBC News, the province faces a $4.1bn deficit for the current fiscal year and a forecast $9.4bn shortfall for 2026–27.
The current year’s budget assumed West Texas Intermediate crude at US$61.50 per barrel, with the coming fiscal year based on US$60.50.
The sudden stoppage of all oil tanker traffic through the Strait of Hormuz, a route for about one-fifth of the world’s crude, pushed WTI up about 8 percent to US$71.35.
Premier Danielle Smith said, “I suspect that rather than a $4.1 billion deficit that we were projecting in the budget, it might be somewhat less than that.”
CBC News, citing University of Calgary economist Trevor Tombe, said a US$1 increase in oil prices over a year adds about $680m to Alberta’s revenues, or roughly $2m per day.
A US$10 increase translates to about $20m per day; if that persisted for all of March, Tombe estimated about $600m in reduced deficit.
Even so, he told CBC News that Alberta would still face a $2bn to $3bn deficit next year at current prices.
Finance Minister Nate Horner said Alberta needs US$74 per barrel to balance and wants “conservative forecasts” based on advice from multiple private-sector analysts.
CBC News reported that Horner warned any price spike could fade as “the risk dissipates” and markets return to a supply-demand calculation.
