Saudi Arabia will eventually have to back down in its oil price war, says Red Deer-South MLA Jason Stephan.
A question about oil prices and its impact on Alberta’s budget was inevitable as Stephan and Agriculture and Forestry Minister Devin Dreeshen took questions at a Rotary Club Red Deer East luncheon on Tuesday.
They were standing in for Alberta Finance Minister Travis Toews, who was to have been the speaker, but was called away to Ottawa.
Saudi Arabia’s move to slash oil prices and boost production at a time of decreasing demand is unprecedented, said Stephan.
“They can’t keep it up forever,” he said. “They are much more oil-dependent than, certainly, our country is, and even Alberta.”
The Middle Eastern nation’s dramatic weekend moves caused oil prices to plummet on Monday, prompting Premier Jason Kenney to hold a news conference and pledge that “all options were on the table” to protect Alberta jobs and its economy.
Borrowing to fund job-creating capital projects, tax incentives and even subsidizing a barrel of oil could be among the options. The federal government is also being lobbied to provide financial relief to Alberta through measures such as reduced payroll taxes.
Stephan said the Alberta government is “doubling down” on its intentions to put the province’s finances in order.
Dreeshen said the oil price plunge is a “very significant problem,” made worse by the coronavirus that some have projected will have a two per cent impact on the world economy.
The province had built its budget based on a US$58 barrel of oil. The price plummeted to a little over US$31 on Monday, but had recovered partly to over US$34 in Tuesday trading of West Texas Intermediate.
The Innisfail-Sylvan Lake MLA pointed out that companies such as Calgary-based Cenovus Energy have already reacted. Cenovus announced earlier on Tuesday it was slashing its capital spending budget by one-third, to between $900 million and $1 billion.
“Our budget projections, especially in the last couple of weeks, are not looking good,” acknowledged Dreeshen.
Stephan gave an overview of the government’s latest budget during his presentation. He credited local lobbying efforts for helping make the case for the $100 million in hospital expansion funding announced by the government last month.
“The decision to support the hospital was not a last-minute decision,” he said, adding he and Red Deer-North MLA Adriana LaGrange, the education minister, had to maintain budget confidentiality.
“The decision had been made months ago.”