Plunging world oil prices are a mixed blessing for Albertans

With world oil prices plunging to four-year lows — combined with the recent elimination of the federal carbon price — many Alberta drivers are saving some money when they pull up to the pump.

Mani Singh of Edmonton told Global News that he used to spend about $500 per month on gas, but now he’s only spending about $300 per month.

“I’m saving a lot of money,” said Singh, who on Friday was paying 124.9 for a litre of gas at his local station.

In Calgary, after selling for as low and 109.9 per litre on Wednesday,  the price had jumped back up over 130. per litre by Friday.

“I think for Albertans as consumers going into the driving season, prices will be pretty favourable,” said Richard Masson, an executive fellow at the University of Calgary’s School of Public Policy.

“With the reduction from the carbon tax of 18 cents and now lower oil prices, that’s all translating into lower prices at the pumps, which will help Albertans. Especially those who decided to stay home and holiday this year,” added Masson.

Masson said there are two primary reasons why oil prices are plunging.

“Prices have weakened over the last few weeks, primarily driven by the tariff threat that President Trump has around the world and the likelihood that will lead to a recession which lowers oil demand,” said Masson.

“On top of that, Saudi Arabia has been working to bring back 2 million barrels a day of OPEC plus cuts and they decided to do it quicker than anybody had expected.”

The uncertainty in the world oil markets has pushed the price below $58 US per barrel this week.

While the low prices may be a blessing for drivers, if the price continues at that level it will create a huge problem for the provincial budget, which was originally forecast to include a $5.2-billion deficit on the expectation that oil prices would average about $68 per barrel.

“Each $1 change is a $750 million hit to the Alberta budget — so a $10 change over the course of the year is $7.5 billion,” said Masson.

The pain may be lessened somewhat because the price difference between the price of west Texas intermediate (the benchmark grade for global oil pricing) and western Canada select (the price heavier Canadian crude) has narrowed in recent months — which should help reduce the size of the deficit.

But Masson said if these low world oil prices continue, “it’s going to put a lot of pressure on provincial spending.”

The office of the Alberta finance minister says the provincial government will provide a budget update in August.

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