Economists say oil’s continued slump is a bigger drag on the economy than first thought, but they still believe the federal government has enough wiggle-room to eke out a balanced budget this spring.

As oil slumped late last year and early this year, politicians were quick to point to the silver lining: lower oil prices mean lower gas prices, and that means more money in the pockets of consumers.

Benchmark oil prices are now half of what they were this time last year — but, after an initial dip, the price at the pump has crept back up.

According to Gasbuddy.com, which tracks gas prices across regions in Canada and the U.S., the average price at the pumps in this country is less than 20 per cent below what it was last March.

The falling Canadian dollar and excise taxes on gas are largely to blame for the savings not being greater.

While it’s estimated the lower energy costs save consumers on average about $800 a year, Randall Bartlett, senior economist at TD Economics, says 75 per cent of those savings are being eaten up by other higher prices.

"The cost of the goods that we import have been going up, so that includes things like food, I would also include clothing and footwear, furniture," Bartlett said.

That means consumers are not being left with more money in their pockets to fuel economic growth left sagging by low oil prices.

Job losses

What’s more, the slowdown in the oil sector and related industries is already leading to job losses.

The unemployment rate jumped to 6.8 per cent in February, and TD sees it rising to seven per cent by the end of the year before it starts to climb back down in 2016.

From Ottawa’s perspective, that means less corporate and income tax revenues coming in.

"We saw them decline in the last quarter of 2014 and they're expected to decline in the first half of 2015 as well," said Bartlett.

"Taking those together, those are two of the big areas of revenue for the federal government so, as a result, we're expecting those to be a real drag on revenue growth in 2015-2016 fiscal year."

Finance Canada’s planning assumption in the fall economic update was that oil would average about $81 US a barrel.

With that, it predicted a surplus of $1.9 billion.

In a report released Tuesday, TD Economics predicts oil will likely hit bottom in May of this year and average just $42 for the first half of the year before starting to climb again.

Balanced budget still within reach

TD Economics still believes the Conservative government will keep its promise to table a balanced budget this year — although it will likely take some finagling.

"They have the $3-billion contingency reserve that's available to them to use to shore up the budget balance," Bartlett points out. "They could [also] essentially lapse funds and do that kind of thing, or put spending off to subsequent fiscal years, in order to essentially be able to balance the budget this year."

Finance Minister Joe Oliver doesn't seem worried about how to keep the Conservative promise to balance the budget this year, although he's not giving any hints as to how.

"[The price of oil] does have a complex implication and what it has done for us is reduce our flexibility somewhat, and we're dealing with that, and we'll announce the results when I table the budget," he told reporters Monday.

From an economic perspective, this is the normal ebb and flow of the tides.

For a government seeking re-election later this year, the hope is that the tide is high when voting day comes.