MONCTON, N.B. — Newfoundland and Labrador’s reliance on oil revenues, which only a few years ago pulled it out of decades of economic funk, has proven to be a slippery solution as prices continue to sink and take the province’s budget down with them.
Even as the price of crude dipped below $100 a barrel on Friday, the finance minister said there’s no need to panic just yet.
"It’s still very early and there is the potential for oil prices to rebound," Tom Marshall said Monday. "We will continue to monitor the price closely to determine if any further action is required."
That action could be drastic if the current trend continues.
One out of every three dollars the provincial government spends comes from oil revenue — and the ruling Tories were expecting $2.23 billion based on oil holding at $124 a barrel.
With oil prices continuing to sink, the province’s deficit is expected to climb considerably.
That the province counted on the price of oil to stay high was just one problem, says one economist. But running a deficit budget only compounds it.
"An important way to limit the province’s exposure to resource price volatility would be to pay down its debt — or at least get it down to the level of a Saskatchewan or British Columbia," David Campbell of Jupia Consultants said.
In its April budget, the province forecast a budget deficit of $258 million for 2012-2013. That compares to a surplus of $776 million in 2011-2012.