Oil price is rebounding, but no quick decisions, says finance minister

The province of Newfoundland and Labrador will stay the course financially despite rising oil prices that are putting more money into provincial coffers.

Brent crude hovering around $80 US per barrel

Finance Minister Tom Osborne says there will be no quick decisions as to what to do with an unexpected increase in oil revenue. (CBC)

The province of Newfoundland and Labrador will stay the course financially despite rising oil prices that are putting more money into provincial coffers.

With the price of Brent crude oil beginning to rebound to nearly $80 US a barrel, the province will have a little extra money coming its way before the next election and provincial budget.

However, Finance Minister Tom Osborne says the provincial Liberals will not make decisions based solely on the price of oil.

"We're not going to make any spending decisions. We're not going to make any other decisions based on where oil has been because it is still volatile, and we know from south of the border that certain decisions may affect oil upwards or downwards. So we're going to continue to be prudent," Osborne told CBC Radio's On The Go.

"While we're doing very well with oil, you know, we're not going to make decisions solely based on oil because it is 15 per cent of the province's revenue. When you look at four or five years ago it was 30 per cent. So you know we're becoming less reliant on oil and looking at other ways of the province maintaining revenue and so on."

Osborne says Muskrat Falls is a complex issue. Before spending added oil revenue on mitigating high electricity rates the provincial Liberals will complete their mid-year review. (Nalcor)

Osborne said for every dollar per barrel of oil above $63 the province gets just under $23 million Cdn.

"But there are other factors that impact oil revenues as well such as production and so on," he said, adding the provincial government will re-evaluate during the financial update in October or November.

"I know that staff within the Department of Finance now are working on what the fall fiscal update is going to look like," he said.

The big question is whether or not the extra oil money will go toward mitigating the higher electricity rates expected when the Muskrat Falls development comes fully onstream.

With Brent crude oil hovering around $80 per barrel, Newfoundland and Labrador is seeing an unexpected increase in oil revenues. (Paul Daly/Canadian Press)

Osborne said government is still looking at all its options.

"We've been looking at a number of layers on how to mitigate rates. Just recently we referred [it] to the Public Utilities Board, that's only one layer. We're looking at amortization of the project and how that may affect mitigation," said Osborne.

"We're looking at financing options, another layer. So there are several layers at play right now where we can look at mitigating rates to have the least impact on ratepayers."

With files from On The Go

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