Rising oil price slashing N.L. deficit

A recent surge in the price of oil is good news for Newfoundland and Labrador's bottom line.

The price has pushed close to $80 a barrel this week, exceeding the province's projections, says Tom Marshall, the new provincial  finance minister.

"Yes, it has taken a bit of a run the last few days, which is always good news for governments," Marshall said Tuesday.

If the price averages $70 a barrel for the entire year, it could wipe out the provincial deficit, but Marshall cautions against such predictions yet.  

"It's not just the price," he said. "It's the volume. It's the exchange rate and of course we don't know what's going to happen in the future in terms of production numbers."

Marshall will offer a better picture of the deficit when he gives a mid-year fiscal update. His officials are crunching the numbers now and Marshall is promising to release them later in the fall.

Already Newfoundland and Labrador's fiscal status is looking better than it was last spring, when the province announced its 2009-10 budget.  

"Our government will run a deficit of $750 million in 2009-2010 rather than cut spending for important programs and services," Jerome Kennedy, the former provincial finance minister, said at the time.

On budget day, oil was projected to stay at about $50 per barrel. Already it has averaged more than $60 per barrel for most of the year.