Alberta’s oil slump will affect every Canadian

When Alberta’s oil falls, the shock waves ripple throughout the Canadian economy

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Alberta is staring at a multibillion-dollar deficit, and the culprit is once again falling crude prices. After years of talk about diversification, the province remains dangerously exposed to oil markets it cannot control, and the latest downturn proves how little has changed.

Oil markets are bracing for a glut. OPEC+ members are turning on the taps, South American production is climbing, and analysts warn that demand has already peaked for the year. By the first quarter of 2026, crude prices are forecast to slide even further.

When Alberta stumbles, the effects ripple nationwide, from federal transfers and energy revenues to lost jobs, weaker investment and a softer Canadian dollar.

Wall Street banks have slashed expectations, with West Texas Intermediate projected to average just US$64 a barrel. For Alberta, every dollar decline wipes out another $750 million in revenue.

The hit to Alberta’s bottom line is brutal. Finance Minister Nate Horner projects Alberta will end the fiscal year $6.5 billion in the red: a swing of nearly $15 billion from the $8.3-billion surplus booked only a year ago. Oil royalties account for a huge share of Alberta’s budget, far more than in any other province. When prices fall, it isn’t just government spreadsheets that suffer. It means fewer dollars for hospitals, schools and basic services.

To make matters worse, geopolitical tensions—from Middle East unrest to U.S. tariff battles—add risks Alberta cannot control.

Instead of breaking the cycle, Premier Danielle Smith’s government is scrambling to manage it. Abroad, Alberta is chasing new markets. The province has opened talks with Japanese refiners about funding a coker unit to process the heavy, high-sulphur crude produced in the oilsands. Without such a facility, Japan has little capacity to handle Alberta’s oil.

Officials have also made repeated trips to Asia, particularly Japan and South Korea, to pitch both light and heavy crude. Ottawa says it is monitoring developments and remains open to projects that fit the Carney government’s definition of the national interest. In other words, it is waiting to see if Alberta can bring forward projects that expand trade and jobs while fitting within the Liberal government’s climate commitments.

That outreach is paired with new infrastructure at home. The Trans Mountain pipeline expansion tripled capacity to 890,000 barrels a day, finally giving Alberta meaningful access to Pacific markets after decades of dependence on the United States. China has quickly emerged as the top buyer of Canadian oil shipped through the line, followed by the U.S. West Coast and South Korea. But even with the pipeline in place, Alberta’s fiscal fate still hinges on whether foreign buyers want its crude and at what price.

At the same time, the Alberta government is cutting costs. Universal access to free COVID-19 vaccines is ending, with most Albertans now expected to pay $100 a shot. For ordinary families, that means new out-of-pocket health-care costs on top of rising living expenses. Business subsidies, long a drain on the treasury, are also under review. Reducing or eliminating them could help rein in spending, but such moves underscore the province’s reactive approach: scrambling for short-term savings while avoiding deeper structural reform.

The truth is unavoidable. Alberta’s fiscal health remains chained to oil, and efforts at diversification have been more rhetoric than reality. Manufacturing, technology and value-added energy development still trail far behind the overwhelming reliance on raw exports. Chasing buyers in Asia may buy time, but it won’t change the underlying vulnerability.

What Alberta needs is the courage to admit that the old model is broken. Continuing to ride the roller coaster of oil dependence is not a strategy; it’s a gamble. Relying on the hope that the next boom will solve everything is the very mindset that has kept Alberta stuck in cycles of temporary surpluses and crushing deficits.

Albertans deserve better than another spin on the resource-revenue merry-go-round. And Canadians outside the province should care, too. Alberta’s finances don’t exist in isolation. When the province’s budget collapses, it ripples through the national economy, affects federal transfer payments and complicates climate and energy policy.

The coming year will test whether the Smith government can treat this downturn as the wake-up call it is. Alberta can finally start building an economy resilient enough to weather global shocks, or it can gamble once more that oil prices will rebound before the bills come due.

The choice will define not just Alberta’s future, but Canada’s.

Toronto-based Rashid Husain Syed is a highly regarded analyst specializing in energy and politics, particularly in the Middle East. In addition to his contributions to local and international newspapers, Rashid frequently lends his expertise as a speaker at global conferences. Organizations such as the Department of Energy in Washington and the International Energy Agency in Paris have sought his insights on global energy matters.