Wall keeping eye on oil prices
The global oil glut is offering a sweet deal at the gas pump, but it may not be so great for the province.
Premier Brad Wall is keeping his eye on the slump in oil prices which, over the past two weeks, has driven down costs for Canadian consumers by more than 15 cents per litre.
Per barrel, the slide saw prices fall from around $95 on Oct. 1 to $85.82 on Thursday. When the budget was released in March, the province banked on $94.25 per barrel. That was upped in August to $99.89 and, given that the first six months of the budget year saw higher oil prices than expected, Wall didn’t seem too concerned about the lost revenue side of things on Thursday. But if prices remain low, Wall said the government is going to have to “work hard to contain costs” to maintain a balanced budget.
He didn’t say what exactly that would mean for the province, nor could a Finance Ministry spokesman guess what steps the government might take if the situation continues.
Another point of concern is possible job cuts in the oil sector if the price of oil remains low and production stalls.
“Right now, we’re watching it carefully,” Wall said.
Around 11 per cent of Saskatchewan’s revenue, $1.56 billion, comes from oil sector royalties. Other nonrenewable sources — potash and uranium, for example — make up another eight per cent.
That’s less than the $6.8 billion taxes bring in, but cash from non-renewables helps provide the provincial budget with some flexibility.
And that “wiggle room”, says Ken Rasmussen, professor of public management at Johnson-Shoyama Graduate School of Public Policy, is incredibly important.
When asked how Saskatchewan would fare with lower oil prices, Rasmussen said one word without hesitation: “Badly.”
“This is not good news,” he said.
“Our governments — both the NDP and this government — staked a lot on resource royalties in terms of funding the budget, and that’s the danger.”
Jeff Welke, spokesman with the Ministry of Finance, was more cautious in his assessment of the impact of oil prices, saying “it’s difficult to make entireyear projections based on a couple of weeks.”
The mid-year projections due at the end of November, he said, would provide a clearer picture for the province. If oil prices do continue their slump, Rasmussen hopes it doesn’t result in a “slingshot budget,” which could throw uncertainty into the economy.
Wall remains confident that a combination of factors — the higher-than-expected oil prices early on, the value of the Canadian dollar and Saskatchewan’s “diversified economy” — mean the province is “still on track” for a balanced budget.