Alberta Energy Sector Navigates Diverging Oil and Gas Futures Amid Policy Shifts
Oil prices are down while natural gas sees an upswing, influenced by new LNG exports and a federal-provincial energy agreement impacting Alberta's energy landscape.
For many Canadians, particularly in Alberta, the daily check on oil and natural gas prices sets the tone for their workday, an often anxiety-inducing exercise due to inherent market volatility, observes Rob Roach, ATB Economics. This fluctuating landscape requires stepping back to discern longer-term trends.
Diverging Energy Price Trends
Oil prices have seen a downward trend, with the West Texas Intermediate (WTI) benchmark 16% lower year-to-date through November compared to 2024, according to ATB Economics. Western Canada Select (WCS) also decreased by 15%, though a smaller differential helped mitigate the impact, linked to increased egress capacity via the Trans Mountain expansion. While this benefits consumers, it raises concerns for producers and investors. The Alberta Energy Regulator forecasts WCS at US$55.00/bbl in 2025, rising to US$56.00/bbl in 2026.
In contrast, natural gas prices, after a weak 2024, are trending upward. The Alberta benchmark (AECO) is up 54% year-to-date, with November prices 72% higher than a year ago. This turnaround is largely driven by Liquefied Natural Gas (LNG) exports, notes ATB Economics. The LNG Canada facility on the B.C. coast commenced operations and shipped its first cargo in June, completing over 25 cargo shipments by November, draining ample North American supply. ATB Capital Markets' survey indicates strong optimism for an LNG Canada Phase 2 Final Investment Decision by late 2026.
Policy and Economic Implications
These divergent trends unfold against a backdrop of significant policy shifts. A recent federal-provincial agreement between Canadian Prime Minister Mark Carney and Alberta Premier Danielle Smith eliminates the federal emissions cap on the oil and gas sector and rescinds clean electricity regulations for Alberta. In return, Alberta will strengthen its industrial carbon pricing to a minimum effective credit price of $130/tonne, supporting carbon capture and storage projects. The agreement also paves the way for a new oil pipeline to the West Coast, adjusting the Oil Tanker Moratorium Act to enable Asian oil exports, with Alberta planning to submit an application by July 2026. This framework aims to stabilize investment and facilitate market access for Alberta's energy resources amidst evolving global demand.
