Premier Jim Prentice announced Monday that government hiring will be restricted to critical or frontline positions.
There will also be spending restrictions for goods and services and on discretionary items such as travel and training.
"We do not know how long this price trough is going to continue, but it may go far longer than has been expected," Prentice said Monday as the price of a barrel of oil closed at US$55.91.
"So our challenge is how do we weather this price trough."
Prentice said the province could see a $7 billion drop in resource revenue this year.
The cost-saving measures will also apply to Alberta Health Services, schools, universities, colleges and agencies.
Prentice has formed a special committee of cabinet ministers that he will lead to work on the government's upcoming budget.
He said the group will look at economic projections, capital and operating budgets, policy commitments and revenue forecasts.
The committee will include Finance Minister Robin Campbell, Health Minister Stephen Mandel and the ministers of Municipal Affairs, Energy, Infrastructure and Jobs.
Prentice said last year the province received more than $9 billion in resource royalties, which accounted for 21 per cent of its budget.
"We will keep our spending in check, ensuring that we operate with balanced budgets, we will tighten our own belts before we ask Albertans to further tighten theirs," he said.
"Albertans cannot be asked to pay more without first seeing evidence that we are doing more with the dollars that we currently have."
The government announcement Monday came less than three weeks after the government adjusted its budget for the remainder of the year based on US$75 per barrel oil. The revised average forecast for the year is now US$88 per barrel.
In the March budget, the province forecast oil to average around US$92 a barrel.
For the first six months of the year, it was higher than that, at around US$100 a barrel.
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