Falling Crude Oil Prices Force Canada To Go Easy On Spending Plans

At least two ministers in Canada have said the government could pull all stops on planned spending activities on 2015 to ensure it delivers its promised balanced budget. The Canadian government has delayed the federal budget until at least April, triggered by the unstable prices of crude oil in the world market.

Jason Kenney, federal minister of employment and social development, on CTV's Question Period on Sunday, said the government of Prime Minister Stephen Harper will have to control federal operating costs because of the low crude oil prices. He vowed, however, that extension of services to the Canadian people will not be affected. "We'll have to certainly look at potentially further spending restraint," Kenney, also chair of Cabinet Committee on Operations, said. The market's volatility has likewise prompted Finance Minister Joe Oliver on Thursday to say the government will have to wait until at least April to present its budget.

Since Canada had actually operated on a spending freeze for sometime now, Kenney said that might need to be extended further. Although the government has an annual $3-billion contingency fund, Kenney, in a separate interview with Global's The West Block, ruled out using it to achieve balance, noting a contingency fund can only be used for "unforeseen circumstances like natural disasters."

From a high $105 in June 2014, the price of a barrel of oil has plummeted by more than half in recent days. The drop translates to billions in lost tax revenue for Ottawa. Canadian banks expect crude oil prices could go lower than $50 per barrel in the coming months, risking the country's overall growth and threatening federal and provincial government revenues.

On Jan. 12, Saudi Prince Al-Waleed bin Talal bin Abdulaziz al Saud told USA Today that oil prices might "never" return to the glorious $100-a-barrel mark because of oversupply and less demand. "Both are recipes for a crash in oil," Alwaleed told the paper. Darin Newsom, senior analyst at Telvent DTN, told CNN Money, forecast price levels could hit to those in the late 2008 and early 2009 -- down in the $30s.

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