Four decades ago, Alberta Premier Peter Lougheed came to power, with the promise to make the province’s economy less dependent on the fluctuating price of oil and gas. Yet decades on, the province’s finances are still heavily reliant on royalties from bitumen sales to the United States, and natural gas sales across Canada and around the world.
Progress has been made. While it was a very different era to the one we find ourselves in today, Lougheed’s first few budgets were completely dependent on oil revenue, which at one point made up nearly 80 per cent of the income for Alberta’s provincial coffers.
In 2024 that number was closer to 27 per cent.
The 2025 budget introduced by Alberta finance minister Nate Horner on February 27th pegs the forecasted revenue from oil and gas at about 28 per cent, though they are cautiously budgeting it to be a few points lower.
In the last decade, the revenue share of Alberta’s budget which depends on oil and gas royalties has been as low as eight, and as high as 30 per cent.
What this means is that one out of every four dollars spent on health care, education, and critical social services depends on the oil and gas sector having a very good year. The financial well-being of the petroleum industry is so crucial to Alberta’s budget that a special Economic Outlook section focused almost entirely on the price of West Texas Intermediate Crude (pegged at $68/barrel).
I expect that by now you see the flaw in this logic. The American market is no longer a reliable purchaser of our crude oil. America is now the largest energy producer in the world and has high hopes for being energy-independent in the coming years. While many of the country’s refineries have been converted to process the heavy crude we sell them, only money is preventing them from re-tooling once again to manage the lighter oil produced throughout much of the US’s portion of the Western Sedimentary Basin.
A quick scan across the rest of the world doesn’t demonstrate much hope that our heavy, carbon-intensive, and very expensive crude oil is welcome anywhere else. The Trans Mountain Pipeline, heralded as a means of selling our goop to Southeast Asia and China, today sends most of its product to California. Just ten per cent went to China last year.
Europe doesn’t want our dirty oil. They are at the forefront of the energy transition. While natural gas might have been on their shopping list at the beginning of the war in the Ukraine, that ship has now sailed.
The reality is, within the next five years, it is projected that the world will be consuming 1,000,000 barrels of oil a day less every single year, as the energy transition kicks into high gear nearly everywhere else in the world except Alberta.
We’re stuck. We need the revenue that oil and gas bring to keep our schools and hospitals open, but we can no longer count on our number one market for our products, and we haven’t done nearly enough to diversify our energy economy. We have created major barriers to new renewable energy development to meet our domestic needs, but we continue to put nearly all of our eggs in the petroleum energy basket when it comes to our export market.
It is said that the first step in solving a problem is recognizing that there is one. Alberta’s 2025-26 budget shows no signs of acknowledging that such a problem exists. A $4 billion contingency fund is in place to offset the impacts of American tariffs, but there is no complementary fund set up to invest in diversification so we’re less dependent on the US in the first place.
Why is it so hard for Alberta to have this conversation?
There are solutions, and Alberta has dabbled in them: the high-tech sector, health care research, international education, manufacturing, petrochemicals, agriculture, and tourism, to name a few. None of these on their own can supplant the massive impact that petroleum has on Alberta’s economy. It’s almost as if the province needs to have a group chat about what we want our economy to look like in a post-petroleum world. We should do that before it’s too late.
