Consumers who benefited from cheaper home heating costs this past winter due to record warm temperatures are likely to need those savings to pay their electricity bills this summer, according to a new report from CIBC World Markets.

CIBC World Markets’ Monthly Indicators report released today predicts that natural gas prices will rebound as the summer heats up and demand for electricity to fuel air conditioners rises.

“While record warm temperatures this past winter put money back in Canadians’ pockets we are likely to put it all back into our air conditioners this summer,” says Jeff Rubin, chief economist and chief strategist, CIBC World Markets.

The report discusses the impact of climate change on natural gas prices, given that natural gas is now the fastest-growing and most dominant source of growth in electric power generation. The warmest winter on record in North America in 2005/06 saw Henry Hub natural gas prices plummet by 40%, into the range of $7.00 to $8.00/mbtu.

For roughly 80% of the world’s population living in the northern hemisphere, 2005 was the hottest year since temperatures were first recorded in 1880. As well, the global average surface temperature in 2005 reached a record high. Re-analysis of satellite observations of temperature trends in the troposphere indicates that air temperatures have been warming about 15% faster than was previously thought.

“While there continues to be a debate about causation, there is no longer any doubt that the climate is changing, and changing rapidly,” notes Rubin. “Another hot summer in 2006 will likely set a new record for both home cooling days and ‘scorchers’ – or days in the U.S. when maximum temperatures are way above normal,” says Rubin. “We expect that this will push North American electrical demand to new record highs this summer, and in the process pull natural gas prices up to $10/mbtu.”

Total electricity demand per American household rose 25% between 1992 and 2005 – boosted notably by a 45% increase in energy consumption for air conditioning. The commercial sector is currently consuming 66% more electricity than in 1992, largely due to a dazzling 95% increase in energy usage for air conditioning.

Over the last thirty years, the share of American households with air conditioning has doubled. Among the almost 80% of American households that have air conditioning, two-thirds own the much more energy consuming central air-cooling systems. These air conditioning systems are working increasingly harder due to rising summer temperatures and the rapid growth in the average home size, which is now 40% larger than in the 1970s.