West Texas Intermediate is hovering over $100 a barrel, as the conflict in Iran rages on into its seventh month, all of which boosts the provincial surplus. “Huge budget surplus coming,” said former CEO of the Alberta Petroleum Marketing Commission Richard Masson. On August 27th the province issued its latest fiscal update, forecasting a $2-billion surplus, a huge turnaround from the $9.4-billion deficit originally forecast for the 2026-27 fiscal year. In February, the province anticipated West Texas Intermediate – the North American benchmark oil price — would average US$60.50 a barrel this year. For the latest surplus to hold, WTI would have to average US$65 for the remainder of the fiscal year, which ends next March. “Every one-dollar-a-barrel [price] change over the course of a year adds $750 million, primarily from oil royalties,” said Masson. ‘More power than possessing a nuclear weapon’ Eric Nuttall, who runs the country’s largest energy fund, at Ninepoint Partners, says the high oil prices should have been here long ago. “We give full credit to the effective, jawboning by President Trump. I think we’ve had 38, 39 declarations of an imminent peace deal,” said Nuttall. “Iran realizes that having control or influence over the Strait of Hormuz gives them far more political power than possessing a nuclear weapon,” he added. Helping drive up the price is the escalating tension in Iran war, which is disrupting the flow of oil through the Strait of Hormuz. Earlier this week, the U.S. military destroyed five Iranian crude oil tankers. Yemen’s Houthi rebels in recent days have also attacked Saudi Arabian oil facilities, wounding dozens. The rebels have helped disrupt the strategic Bab al-Mandeb Strait. Other factors contributing to higher-for-longer oil prices include China purchasing more oil again along with the war between Russia and Ukraine. “We’re seeing a lot of the tightness (of supply),” said Nuttall. “It’s started in refined products, and it’s only now starting to become more visible in the oil price.” Nuttall says estimating where WTI pricing is going is extremely difficult with the current geopolitical climate along with President Trump’s discourse. He says people should focus on what the day after looks like. “Whenever the situation eventually does end, however, it may end, we think that the floor price for oil is going to be significantly higher than pre-war,” said Nuttall. He points to a floor of $70 to possibly $80 US for 2027. For those looking to fill up at the pump, Masson imagines people will start to see prices increase, which he says have been relatively low in Alberta. “I would expect to see prices pop quite a bit,” he said. “In general prices are going to be high.” Province responds Thursday afternoon, Alberta Minister of Finance and treasury board president Jason Nixon sent CTV News the following statement: “Strong energy prices support Alberta jobs, strengthen our economy, and help fund the services Albertan’s rely on everyday. “As of the Q1 fiscal update, Alberta’s government is now forecasting a $2-billion surplus for the 2026-27 fiscal year — an improvement of $11.4 billion in a single quarter. “While this is welcome news, it is not a blank cheque. This is still just a first-quarter projection, and we know energy prices can change quickly, trade uncertainty remains real, and Alberta is not yet in a cash surplus position. “Alberta has been here before,” Nixon added. “Flush with temporary increases to resource revenue, governments increasing permanent spending to match, and then oil drops but the deficit stays and Albertans pay the price. “This government will not repeat the mistakes of the past and we will not mistake a temporary windfall for a permanent trend. “Fiscal responsibility will continue to be a top priority for Alberta’s conservative government, and we will be prudent with what we can control to make decisions that help families and communities thrive long-term. “That’s why Alberta’s path forward will continue to be built on our commitment to focus on what matters to Albertans – protecting essential services, controlling spending, balancing the books, reducing debt, growing the Heritage Fund, and — when the numbers genuinely support it — putting more money back in Albertans pockets.”
