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Alberta Commodity Prices Macroeconomics

Fueling Alberta

After this weeks announcement about the revised budget from the province, I thought it would be interesting take a look at historical revenues, particularly those coming from oil and gas. So, today’s entry is more of a general interest post and not concerning the housing market (at least not directly anyway).

So, without further ado here is a look at revenues from the last decade or so, as well as the estimated revenues for this year.

As we can see, revenues have taken quite a dive, and it’s now expected we’ll be down over 8 billion from two and three years ago, and 6 billion from last year. We can also see that shortfall is pretty much entirely due to declining resource revenues.

This is effectively the same graph, but this time the resource figures are broken down into divisions, natural gas, oil (I lumped crude and synthetic crude/bitumen together), and other. Giving us a bit more perspective, we can see that while oil is certainly down from the last three years, historically it’s actually about normal… gas on the otherhand, is very low by recent and historical measures… and other resource revenue is virtually non-existent.

This is looking at it from another angle, this time from a proportion of total revenues (that year). This again shows what we discussed earlier, and that gas is making up a mere fraction of the revenues it normally contributes to government coffers.

Now we’ll isolate just the resource figures. As we can see here, when the government talks about how volatile our resource revenues are, they are not kidding. This year we’re now projected to collect over eight billion less in resource revenue then last year (and over ten billion less then the high water mark in ’05/06). That is expected to be only the second time in this span that such revenues came in below six billion for the year, and the first time below four billion.

This graph is also good to show that typically natural gas is what drives the province… some years the ratio of natural gas-to-oil revenues got as high as 4/1 or 5/1… as opposed to this year when for the first time oil revenues are expected to exceed gas revenues.

Again, we’ll break it down by percentage of contribution. We can see in the last four years there has been a shift and oil is becoming more prominent and gas revenues has settled in just below the 50% mark. Quite the change from earlier in the decade when it was generally in the high 60′s/low 70′s.

What the future holds for this balance will be very interesting to follow. How will the increased gas production in the US effect production here and market price? How will changing environmental effect the oils sands?

Anywho, that was a little look at oil and gas revenues for the province from the last decade or so to send you off on your weekend. If you have any questions, comments and/or observations, fire away.