Newfoundland and Labrador Premier Kathy Dunderdale says the province will cut back on travel and leave some vacant positions unfilled for now as oil prices bubble well below government forecasts.

The province is looking for tens of millions in savings this year, but is facing a potential shortfall of hundreds of millions more than expected.

"We haven’t revised the budget, but we’re taking some measures, because we need to be really mindful," Dunderdale told reporters at Confederation Building Monday.

'I’m not so worried about this year. I’m more worried about next year. Because if oil stays where it is, our deficit could be around $1 billion next year.'—Premier Kathy Dunderdale

"I don’t want to leave it till the end of the year and then try to figure out where we are."

According to the premier, every $1 drop in the price of oil below government estimates  results in nearly $20 million less being funnelled into the provincial treasury.

Newfoundland and Labrador has budgeted for oil to average $124 a barrel in 2012-13.

It began the fiscal year in April near that level, but bottomed out near $90 last month before rebounding back above $100.

Brent crude — a close, but not exact, reference point for Newfoundland product — stood at $103 a barrel on Monday.

"Everybody sees what’s happening with the price of oil, and I see every day what that’s doing to our budget," the premier said.

She is calling the situation a "reality check."

Dunderdale said this year’s deficit could be "significantly higher" than the initial estimate of $258 million.

She says that number could go as high as $600 million or $700 million.

And, she warns, things could get worse.

"I’m not so worried about this year," Dunderdale said. "I’m more worried about next year. Because if oil stays where it is, our deficit could be around $1 billion next year."

The premier said the province is not immune from the impact of global events.

"We don’t live in a bubble," Dunderdale said. "What’s going on in China, what is going on in India, what is going on in Europe, has a direct effect on Newfoundland and Labrador. And we need to be mindful of that all the time."

But at this point, no deeper cuts are planned.

"I’m not there yet," Dunderdale said. "No, I’m not there yet. I’m seeing how this goes. We’re keeping a close eye on it."