By Dustin Tyler Joyce
November 6, 2006

For the first time ever in a single year, America’s spending on energy passed the half-a-trillion mark in 2005. The nation’s rapid growth will cost another $500 billion in new energy spending over the next 25 years. These are some of the findings of a new report issued by The U.S. Conference of Mayors’ Council for the New American City (CNAC).

The report, U.S. Household Budgets: Energy and Housing Costs, is the latest in CNAC’s Metro Economies series. It was released at the 2nd National Summit on Energy and the Environment held in Atlanta October 26 through 27. The report highlights the impact of rising energy costs on household budgets and forecasts the nation’s projected energy expenditures for commercial and residential buildings.

On the morning of October 17—just over a week before the report was released—America’s population passed the 300 million milestone. Another 25 years from now, analysts expect that the nation’s population will exceed 365 million. With that rapid growth over the next quarter-century, Americans will construct 40 million new homes and 20 billion square feet of new commercial space.

While homes and buildings are becoming more efficient, all of this new construction will require a significant amount of energy. This new report, prepared by Global Insight, an economic forecasting firm, projects that these new homes and commercial buildings will use an additional four quadrillion BTUs (British Thermal Units) of energy in addition to the nation’s current energy consumption. By the year 2030, that additional energy will cost $40 billion annually. Between now and then, this country will spend $500 billion on energy for these new structures over the next 25 years.

The report also found that in 2005 alone, Americans spent $501 billion on energy, including gasoline, motor oil, fuel oil and coal, natural gas, and electricity. This year, the average household will have spent $4,795 on energy, up from $3,812 per household in 2004 and $4,443 in 2005. Next year, the average family will spend $4,841 on energy costs—an increase of over $1,000 since 2004.

Spending on energy in 2005 represented 5.7 percent of the nation’s total household consumption—an increase from 5.4 percent in 2004. This year, energy costs will represent 5.9 percent of the country’s total consumption, and that share will continue to grow. In 2010, energy prices are expected to remain at least 20 percent higher than they were in 2004.

The findings show that these higher energy costs come at an unfortunate time for American families. In June, the Conference of Mayors reported that 80 percent of American families had not seen real wage increases over the previous year. For these families, the higher energy costs mean less money for other essentials.

CNAC’s report further documents the effect of rising mortgage costs for the many families who have adjustable rate mortgages. Combined with adjustable rate mortgages and higher interest rates, meaning higher mortgage payments, many of the nation’s families will be facing even greater financial challenges.

Four states – Nevada, Colorado, California, and Arizona – as well as the District of Columbia had the highest percentage increases in the number of families with adjustable rate mortgages. In these places and across the country, the average increase in monthly mortgage payments will be 150 percent of any projected income gain for that family.

The report suggests that, in the coming decades, energy conservation and the use of green technologies will be increasingly important to the financial well-being of America and its families. For example, if the energy consumption of the new homes and commercial space to be built by 2031 was reduced by just 10 percent, the country would save $50 billion over the next 25 years.