As conflict continues in the Middle East, soaring oil prices have left many wondering what’s next for Alberta’s resource-heavy economy.

West Texas Intermediate (WTI) crude, the benchmark for oil prices in North America, rose above $90 Friday morning and ended the day at just over $91 — a dramatic increase from before the U.S. and Israel launched an attack on Iran last weekend.

ATB Financial’s chief economist Mark Parsons says those prices could lead to short-term revenue increases in Alberta, but the longer term impact remains to be seen.

“I don’t think producers are going to suddenly change their budgets based on what’s happened in the last week,” he said. “We need to see this continue for a little bit longer.”

The province is operating on a $4.1-billion deficit in the current fiscal year, while Budget 2026 forecasts a $9.4-billion deficit for the fiscal year ahead. 

The latest budget, which covers the fiscal year beginning this April, forecasts WTI crude at $60.50 US per barrel, while the current fiscal year ending on March 31 was based on an average of $61.50.

“The province is relying on a very volatile revenue base, and it can easily go the other way,” Parson said.

“The question for the Alberta government is how much can they bank on this revenue to meet ongoing spending needs caused by population growth like schools, hospitals, road infrastructure. So that problem hasn’t gone away.”

Speaking to reporters Friday, Minister of Transportation and Economic Corridors Devin Dreeshen said “we’ll see what happens” when asked what oil prices could mean for Budget 2026 and projects going forward.

“Obviously, from a budgeting standpoint, it does have to extend throughout the entire year to make a big difference,” he said, not addressing any specific projects.

Parsons said the higher oil prices would lead to “an uplift in revenues in the energy producing provinces of Alberta, Saskatchewan, Newfoundland. In the provinces that don’t produce energy, it’s mostly higher costs … what you’re going to see is uneven impacts across the country.”

The price of Western Canadian Select, Canadian oil traded at a discount to WTI, could also benefit due to a potential shortage of heavy crude coming from the Middle East, Parsons said.

How high could oil go? 

It’s unclear how much higher crude prices could get, but some experts have bold projections: oil market analyst Rory Johnston took to social media Friday to forecast WTI prices reaching upwards of $200 US per barrel unless traffic through the Strait of Hormuz resumes.

The strait is a narrow passage between Iran and Oman through which one-fifth of the world’s crude oil travels. Oil tanker traffic there has plummeted since the conflict began.

WATCH | What’s happening around the Strait of Hormuz as conflict escalates?

What’s happening around the Strait of Hormuz as conflict escalates?

CBC’s senior business correspondent Peter Armstrong explains what’s happening around the critical shipping lanes in the Strait of Hormuz on Monday as conflict escalates following U.S. and Israeli attacks on Iran.

The $200 prediction seems “a bit high” to Tristan Goodman, president of the Explorers and Producers Association of Canada, but he says he could see prices cross the $100 mark if current trends continue.

“It really depends on the situation on the ground and what’s been taken offline,” he said. “It’s not just about [passage through the Strait of Hormuz], it’s a matter of what oil facilities and oil production is still online within the region.”

Goodman said “it’s quite surprising how quickly producers can bring that production back online, which is a beneficiary to maintain price stability.”

That stability is crucial in a situation evolving this rapidly, he said.

“I think you’re probably going to see higher prices going forward, regardless of what happens within that area,” he said. “Even if stability starts to come back, and there’s resolution to this conflict — which actually doesn’t look like that’s going to be the case right away here — you’ll still see some high prices.”

WATCH | Could Canada fill the Iran war oil supply gaps?

Could Canada fill the Iran war oil supply gaps?

With the Iran war threatening to upend much of the world’s oil and gas supply from Gulf states, experts say there could be a big uptick in demand for Canadian energy products, but Canada’s limited ability to get the products to market could be an obstacle.

Soaring prices aren’t necessarily a good thing for producers in the industry, especially when they change so dramatically and come with such unpredictability, Goodman said.

“It always sounds great to have really high prices, but actually even the producers don’t want that, because then you start to have negative impacts across the economic system,” he said.

“Once you get [oil prices] above $100 … it’s positive in one sense, from the short-term, from a profit perspective, but it’s not necessarily giving the stability you need within your product.”

Gas prices averaged 144.3 cents per litre across Canada on Friday, according to CAA National — a significant increase from 127.6 cents per litre last month. 

Goodman and Parsons say the situation could lead to increased investor confidence in Canada, but that more certainty is needed domestically.

“I think investors are going to be looking at Canada as a pretty safe place to put their money. The question is: can we build the pipelines, the market access that’s needed to increase our production?” Parsons said.