Oil-price collapse to cut $4.3 billion from federal revenues: report

The sharp collapse of world oil prices will cut the Canadian government’s income by $4.3 billion this year and deliver a nearly $10-billion blow to the provinces, says a new report Tuesday by the Conference Board of Canada.

OTTAWA — The sharp collapse of world oil prices will cut the Canadian government’s income by $4.3 billion this year and deliver a nearly $10-billion blow to the provinces, says a new report Tuesday by the Conference Board of Canada.

The study predicts the slide in crude prices to chop $4.5 billion from provincial royalties in 2015, with the bulk of the losses expected to strike the oil-producing regions Alberta, Saskatchewan and Newfoundland and Labrador.

Due to cheaper oil, the board also predicts provincial tax revenues to drop another $5.2 billion this year.

“The dramatic decline in the world crude oil prices since last June will have a major impact on Canada — one of the largest oil producers in the world,” says the report, titled, “Regional Shakeup: The Impact of Lower Oil Prices on Canada’s Economy.”

The report was released as the federal and provincial governments try to grapple with the impact of falling oil prices and how the tumble could affect their bottom lines.

The extent of the number-crunching challenge faced by Ottawa, which indirectly amasses cash from oil production, was recently pushed into the spotlight.

Last week, federal Finance Minister Joe Oliver announced the government would take the unusual step of postponing the budget until at least April, so it could assess the fallout of tumbling crude and the sudden reduction in capital expenditures in the Alberta oilpatch.

Oliver warned in November dropping oil prices could trim federal revenues by $2.5 billion a year between 2015 and 2019. Since that time, crude has plunged even further, from about US$80 per barrel to under US$50.

“The federal government will share in the pain,” said the Conference Board report.

Canada’s central bank has also been studying the potential damage.

On Wednesday, the Bank of Canada is expected to produce its forecast on what the oil slump could mean for the Canadian and world economies when it releases its latest monetary policy report.

The central bank will also will make its interest-rate announcement. It’s expected to stand pat on Canada’s trend-setting rate, which has been cemented at one per cent since September 2010.

Last month, Bank of Canada governor Stephen Poloz said lower oil prices could slice 0.3 percentage points off the country’s pace of economic growth.

World oil prices have sunk below US$50 per barrel since tumbling from their perch above US$100 last summer.

The Conference Board report predicted crude prices to start rising again and reach US$60 per barrel by the end of 2015. It projected prices to average about US$56 for the year.

Provincially, the oil-price decline is expected to hit hardest in Alberta, which the Conference Board said accounts for 77 per cent of Canada’s oil production.

On the positive side, the report also said low oil prices will produce winners in Canada.

“Ontario and Quebec — Canada’s two largest provinces — will benefit the most from weaker oil prices,” it said.

“A combination of stronger U.S. economic growth and the weaker loonie, which is currently trading in the US$0.84 range, will boost demand for exports from these provinces.”

Get local stories you won't find anywhere else right to your inbox.
Sign up here

Just Posted

Red Deer Public Schools says that in the absence of additional funds from the provincial government, there was no consideration of using alternate classroom sites in the district. (AP Photo/Gregory Bull)
Red Deer Public Schools launches online engagement process

Red Deer Public schools is seeking community input to help ensure a… Continue reading

Red Deer Rebels defenceman Mason Ward battles with a Medicine Hat Tigers’ forward during the WHL Central Division season opener. (Photo by Rob Wallator/ Red Deer Rebels)
Tigers come back to spoil Red Deer Rebels home opener

It’s been nearly 345 days since the Red Deer Rebels last played… Continue reading

Students walk into Hunting Hills High School, which is one of the Red Deer Public Schools with solar panels on its roof. (Photo by SEAN MCINTOSH/Advocate staff)
Red Deer high school was placed in lockdown following potential threat

Hunting Hills High School was placed in a lockdown Friday after Red… Continue reading

Red Deer Mayor Tara Veer says some details of the provincial government’s 2021-22 budget need to be ‘sorted out’ when it comes to the hospital expansion funding. (File photo by Advocate staff)
More detail needed regarding hospital funding, says Red Deer mayor

Red Deer Mayor Tara Veer says some information is unclear regarding the… Continue reading

Alberta Health reported two new COVID-19 deaths in Red Deer Friday. (Image courtesy CDC)
Two more deaths linked to Olymel outbreak in Red Deer

Province reported 356 additional COVID-19 cases Friday

An arrest by Red Deer RCMP is facing online scrutiny. No charges have been laid and the incident is still under investigation. (Screenshot of YouTube video)
Red Deer RCMP investigating violent arrest caught on video

Police say officer ‘acted within the scope of his duties’

Runner Melissa Bishop-Nriagu speaks to the media at the opening news conference at the Canadian Track and Field Championships Thursday, July 25, 2019 in Montreal.THE CANADIAN PRESS/Ryan Remiorz
Canadian athletes struggling to find competition as they try to qualify for Tokyo

Canadian athletes struggling to find competition as they try to qualify for Tokyo

New York Red Bulls midfielder Jared Stroud, right, vies for the ball against Toronto FC midfielder Jonathan Osorio during an MLS soccer match in Harrison, NJ., Sunday, Nov. 8, 2020. Entering his ninth season with Toronto FC, Jonathan Osorio said his off-season regimen was no different than in the past. THE CANADIAN PRESS/AP-Eduardo Munoz Alvarez
Veteran TFC midfielder Jonathan Osorio looks to take it to the next level this season

Veteran TFC midfielder Jonathan Osorio looks to take it to the next level this season

Powell, Lowry help depleted Raptors beat Rockets

Powell, Lowry help depleted Raptors beat Rockets

Edmonton Oilers goalie Mikko Koskinen (19) makes the save on Toronto Maple Leafs' Zach Hyman (11) as Tyson Barrie (22) defends during third period NHL action in Edmonton, Saturday, Jan. 30, 2021. Toronto continues to lead the North Division standings, but hard-charging Edmonton is now just four points back on the all-Canadian circuit heading into a three-game series between the teams in Alberta's capital beginning Saturday. THE CANADIAN PRESS/Jason Franson
Maple Leafs, Oilers set for key three-game series atop North Division

Maple Leafs, Oilers set for key three-game series atop North Division

Angela James stands on centre ice in front of the Toronto Maple Leafs team after being inducted into the Hockey Hall of Fame before Toronto Maple Leafs and Buffalo Sabres NHL hockey action in Toronto on Saturday November 6, 2010. THE CANADIAN PRESS/Chris Young
Hall of Famers James, Lowe, Hay named to Order of Hockey in Canada

Hall of Famers James, Lowe, Hay named to Order of Hockey in Canada

Toronto Raptors head coach Nick Nurse talks to center Aron Baynes (46) and guard Norman Powell (24) during the second half of an NBA basketball game against the Philadelphia 76ers Sunday, Feb. 21, 2021, in Tampa, Fla. THE CANADIAN PRESS/AP-Chris O'Meara
Nurse, five Raptors assistants sidelined to due COVID-19 health and safety protocols

Nurse, five Raptors assistants sidelined to due COVID-19 health and safety protocols

Team Ontario skip Rachel Homan, centre, makes a shot against Team Wild Card 1 as second Sarah Wilkes, left, and lead Joanne Courtney sweep at the Scotties Tournament of Hearts in Calgary, Alta., Friday, Feb. 26, 2021. Ontario's Rachel Homan kicked off play in the championship pool Friday with a 7-6 victory over Chelsea Carey of Team Wild Card One at the Canadian women's curling playdowns. THE CANADIAN PRESS/Jeff McIntosh
Homan and Einarson improve to 8-1 at Canadian women’s curling championship

Homan and Einarson improve to 8-1 at Canadian women’s curling championship

Prime Minister Justin Trudeau rises during question period in the House of Commons on Parliament Hill in Ottawa on Wednesday, Feb. 24, 2021. THE CANADIAN PRESS/Sean Kilpatrick
New vaccine brings optimism amid rising threat of variants, high case counts

New vaccine brings optimism amid rising threat of variants, high case counts

Most Read