Low Oil: A Fiscal Challenge

There are a number of factors that have a significant impact on our budget. One of them is the price of oil. Due to an unforeseen and drastic drop in global oil prices, the Government of Newfoundland and Labrador is compelled to devise a new budget strategy that will require us to increase revenues, decrease spending, and borrow over the next five years before a planned return to surplus.

Offshore oil revenues are a key source of funding to pay for the delivery of programs and services. As the chart below indicates, oil revenues have plunged during the fiscal year 2014-15:

In Budget 2014, a significant proportion of revenue for the upcoming fiscal year (approximately 30 per cent or $2.4 billion) was estimated to come from oil revenues. Oil prices are determined by a number of complex global factors which are today extremely unstable. The price of oil has decreased nearly 40 per cent since Budget 2014, resulting in approximately $900 million dollars less in anticipated oil revenues. This drop in revenue is the greatest contributing factor in an anticipated deficit of over a billion dollars.

In 2015 we have to have “a new conversation” about what we want our budget to be – this requires a frank and open discussion that addresses our new fiscal reality in the coming years as we manage a gradual return to a zero deficit.

If you experience difficulty in accessing this website or its contents, please contact finance@gov.nl.ca. You can also download the chart data contained within the pages, in Excel format.