Alberta’s economy has been sputtering for a decade, which might explain a lot

The province's economy has contracted in three of the past 10 years, leading to the second lowest GDP growth over the past decade.

Alberta’s economy is on the ropes, which might explain the desperate politics that has taken over the province in the past decade, and especially the past year.

Since 2014, as neighbour British Columbia’s economy has grown over 31 per cent, Alberta’s GDP has increased just over seven per cent, hampered by three years of recession and many years of weakness. Alberta’s economy contracted in 2015, 2016 and 2020.

While all provinces fell into recession in 2020, Alberta’s economy entered the recession weaker, its decline was deeper and its rebound was smaller than among the other three largest provinces.

According to the GDP data released earlier this month, 2024 was a better year for Alberta, with GDP growth of 2.7 per cent, higher then Ontario (1.2%), BC (1.2%) or Quebec (1.3%). But the oil price cut caused by U.S. President Donald Trump’s tariff war has set off a new wave of worry for 2025.

Political instability amid economic weakness

Amid the economic turmoil, the province has had six premiers over the past decade.

Alison Redford quit in spring 2014 after a caucus revolt, replaced by Dave Hancock until Jim Prentice was elected by PC members that fall.

In spring 2015, as the province began two years of recession driven by the dramatic drop in oil price from over $100 a barrel to under $30, Rachel Notley’s New Democrats were elected. During her term, the Progressive Conservatives and Wildrose parties merged to create the United Conservative Party, which then won the 2019 election, making Jason Kenney premier.

But less than three years into his term, in May 2022 Kenney quit after receiving 51 per cent support in a leadership review. Danielle Smith became premier in October 2022 and won the 2023 provincial vote.

With the emergence of a two party system, the UCP has become mainly a party of rural ridings, where landowners are more likely to directly derive income from oil or gas.

The coup against Kenney and Smith’s leadership win were led by the UCP’s far-right, which has now backed Smith into a corner with their support of separatism and, one presumes, their ultimate goal of merging with the United States of Donald Trump, who unabashedly speaks for increased oil and gas extraction.

The province’s economy, when the value of oil and gas extraction is removed, has barely gained any ground in 10 years, rising from $290 billion to just $296 billion, an increase of just two per cent. In the same period, the value of oil sands extraction has increased 63 per cent from $24 billion to $39 billion.

The value of non-oil sands extraction remained stagnant from 2014 to 2021, but in the past three years has moved up from $15 billion to $18 billion, a 28 per cent increase.

The dollar value of crop and animal food production has fallen, coming in lower in 2024 than a decade ago, leaving more farms dependant on alternative revenues, such as oil and gas wells. Alberta’s Energy Regulator reports there are 53,000 active oil and gas wells across the province.

The decline in Alberta’s economy, save and except oil and gas, easily explains the wave of political desperation to hang onto the one sector providing growing revenues. It’s not just a desperation for those whose household incomes are derived from oil and gas, but also the provincial government itself, which raises almost a quarter of its revenues from oil and gas royalties.

This was predicted to be a better year for the Alberta economy, but Donald Trump’s “liberation day” tariff war has cut oil prices on the expectation of lower demand due to lower international trade and lower global economic activity.

The Alberta budget is premised on a barrel of West Texas Intermediate oil selling at $68, but this morning a WTI barrel was priced at about $61. The difference could double the provincial budget deficit to $12 billion in 2025.