Saskatchewan could see as much as a $500M revenue shortfall due to falling oil prices

The falling price of oil amid a global oversupply means the Saskatchewan government could see a$500 million hit to provincial coffers if prices don't improve, according to economist Jason Childs.

The government releaseda "scaled back budget" on Wednesday, detailing only the province's spending plans, which includes more money for health and education.

"There's going to be a big hole in the budget to fill," Childs told CBC Radio's Blue Sky on Thursday. "Now, that's if [oil]stays at those kinds of prices for the entire year."

Finance Minister Donna Harpauerhas noted the budget could face a significant shortfall if prices remainat $30 US a barrel.

The price of a West Texas Intermediate has fallen by more than 50 per cent since the beginning of 2020. Prices were hovering over $60in January but have since fallen to about $26 a barrel or about $37 Cdn.

The Opposition New Democratic Party of Saskatchewan had been calling for the government to hold off on its budget, partly because of the falling prices, but also due to the growing COVID-19 pandemic.

Revenue projections during the last fiscal update were relying on prices of around $61 US a barrel, nearly double the price it is today. Saskatchewan's budget was finalized by Feb.28.

The lack of demand has made it more difficult for countries like Saudi Arabia and Russia to cut back production, Childs noted.

When countries such asChina or South Korea start to lift restrictions on society and people re-adjust to daily living, the demand for oil could increase, he said,

"If the projections of peak oil demand are coming true or close to coming true the producers are going to want to get as much out as they can before it's gone."