The continuing expansion of military action in Iran and disruption to the world’s oil trade is underscoring the need for a new pipeline connecting Alberta’s oil reserves to the West Coast, Danielle Smith says.
Addressing reporters at an unrelated event Monday, Smith said Alberta is prepared to help keep up with oil supply, but the disruptions to the Strait of Hormuz underscores the need for a new pipeline running through Western Canada.
“The fact that Trans Mountain allows for us to have a clear line of sight to our Asian partners in order to be able to assist them, the fact that there’s already an expansion that has been announced, it just underscores the need for our million-barrel-a-day bitumen pipeline to the West Coast,” Smith said.
Military action in the Middle East expanded over the weekend when Israel and the United States fired missiles at Iran, killing the country’s leader.
Airstrikes continued through the weekend and some ships have been attacked in the Strait of the Hormuz — a narrow passage at the mouth of the Persian Gulf that sees a fifth of the world’s traded oil pass through.
The waterway was not officially closed Monday, but tanker traffic dropped significantly as navigation systems were disrupted.
Any disruption to traffic through the Strait of Hormuz is highly disruptive to the oil trade, and the threat of shipping disruptions have seen global oil prices jump.
“If this type of uncertainty continues, it just demonstrates that the world and our trading partners and allies need to have a stable source of supply,” Smith said.
Deficit could shrink
Late last year, Smith signed an agreement with Prime Minister Mark Carney that paved the way for a potential Indigenous co-owned pipeline and the clawback of environmental policies standing in the way.
The deal aims for Alberta and Ottawa to agree on an industrial carbon price by April 1 and sets a July 1 deadline for a pipeline proposal to be submitted to Ottawa’s major projects office.
Smith’s latest comments echo what she said following the American capture of Venezuelan President Nicolás Maduro in early January.
At the time, U.S. President Donald Trump stated his plan to ramp up oil production in the South American country, while Smith said such instability bolstered the argument for a new export pipeline to British Columbia.
Alberta’s Finance Minister Nate Horner said while the province is watching changes in oil prices and hopes to see financial gain, the government is forecasting conservatively rather than overestimate the future price of oil.
Still, he said he’s keeping eyes on the “dramatic increase” in prices to between $70 and US$74 per barrel since the markets opened.
“I would much rather the actuals at the end of the year be in a better position, but very much the markets are pricing the risk right now.”
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“If the strait remains closed for along time, you’ll see that reflected in the price, but as the risk dissipates, it will quickly become a supply and demand calculation again. That’s what led us to our forecast in the first place,” Horner said.
The province’s latest projections put West Texas Intermediate – the North American benchmark oil price — at an average of US$60.50 a barrel in the upcoming fiscal year.
Alberta’s government now estimates that every $1 drop in the WTI price carves out about $680 million from the province’s bottom line.
Last week, the United Conservatives projected a $9.4-billion deficit for the coming year based on slacking oil prices. Horner said changes to the market aren’t expected to change the province’s estimate.
Smith said the province’s projected $4.1-deficit projected for the 2025-26 year shrink, but those results won’t be available until June.
“The longer the conflict last, the more that is it going to help Alberta budget,” said Concordia economics professor Moshe Lander. “Whenever there’s any global conflict, whether it’s in Iran, whether it’s in Russia or anywhere else, oil prices tend to rise. That’s going to be good news for the province that just presented a budget with deficits.”
Lander does point out people could eventually feel the pain at the pumps.
“As oil prices go up so do gasoline prices. So it is inevitable that at some point gasoline prices are going to rise,” said Lander.
— with files from The Canadian Press
