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Good morning. It’s James Keller in Calgary.

Alberta’s finances have been in rough shape for years. An economic downturn that began in 2014 after oil prices crashed wiped away billions in oil and gas royalties and drove up unemployment and bankruptcies, which in turn hollowed out personal and corporate income tax.

And if that wasn’t enough, the COVID-19 pandemic and a resulting oil price shock that briefly pushed prices into the negative in 2020 made things worse. In 2021, the province finished the fiscal year with a deficit of about $17-billion.

The bleeding was expected to continue, and in February of last year the government tabled a budget that projected a deficit of $18.2-billion – which would have been the largest in the province’s history.

But high oil prices that have kept West Texas Intermediate, the North American crude benchmark, well above US$100 per barrel for months have changed everything.

In February, the government said it would end the year with a $3.4-billion deficit, which itself was a dramatic improvement, but things just kept getting better. Just a few months later, Alberta ended the year with a surplus of $3.9-billion.

There’s no official estimate for how much extra cash Alberta could rake in for the current year, but it will almost certainly be many billions higher than the razor-thin $500-million surplus projected in the latest budget.

Which brings us to the UCP government.

Premier Jason Kenney came to power in 2019 on a promise to rein in Alberta’s finances, ushering in years of austerity and spending cuts that have shrunk the public service and led to layoffs.

Mr. Kenney is now slowly making his way toward the exit after he received a slim majority in a leadership review in May. His replacement will be elected in October, and an immediate issue will be what to do with all that money, especially with a provincial election looming in the spring of next year.

Even before then, there will be pressure on the current government of Mr. Kenney to reverse some of those austerity measures, take a less hard-line approach to public-sector bargaining, and find more ways to help Albertans struggling with inflation.

Finance Minister Jason Nixon – who is only in the job, potentially temporarily, because his predecessor left to run for the UPC leadership – attempted to temper those expectations.

Mr. Nixon said the government isn’t preparing a spending spree while also warning that too much government assistance aimed at helping out with inflation could backfire. The province has already cut gas taxes and is preparing to roll out electricity rebates.

“We have to take our time,” he said.

The Globe’s Kelly Cryderman writes that the leadership race has put those questions into limbo, as the current government will feel pressure not to do anything too drastic, lest the next premier want a change in course. It’s no secret that the UCP is far from united, and there are significant policy differences between the candidates.

“No one knows who will win the leadership contest, become premier and shape the UCP government this October,” Kelly writes. “The policy gulf between candidates Leela Aheer and Danielle Smith is vast. Government actions into the fall are limited by that uncertainty.”

This is the weekly Western Canada newsletter written by B.C. Editor Wendy Cox and Alberta Bureau Chief James Keller. If you’re reading this on the web, or it was forwarded to you from someone else, you can sign up for it and all Globe newsletters here.