While the U.S. is the largest oil producer in the world, when it comes to profit, American oil producers are watching their margins. That's because the cost of extraction here is significantly higher than in other countries. In fact, among the world’s four largest oil producers, the production cost per barrel would be ranked with Canada as the most expensive, the United States next, then Russia and Saudi Arabia as the cheapest.

There will be a lot to watch for in the coming years. Currently, the cheapest energy sources for the electricity grid are natural gas, solar, wind and geothermal. The latter three sources, which are all emissions-free, are growing rapidly, but our energy markets are so large that it will take a long time to see them take over dominant market shares. 

A competitive market is critically important in determining the economics of our energy system and in moving us towards a clean energy transition. In parallel, we should electrify transportation and replace the costly and dirty energy sources on the current electricity grid (namely coal and older natural gas plants) with lower cost, cleaner, and abundant energy sources.

U.S. electric generators plan to retire over 8 GW of coal-fired capacity in 2025 — equivalent to almost 5% of the current U.S. coal fleet. Some blame it on climate change policies, but the primary reason for retirement is that it isn't economically competitive in the electric grid markets.

Solar is a major supplier of electricity in the state of California and it has dramatically reduced the energy costs for our state. The most critical element in reducing wholesale energy prices is the operation of broad energy markets with a diversity of energy sources.

One market, for wholesale petroleum, is dominated by cartel pricing that’s controlled by the owners of the raw material. In contrast, the electricity grid treats energy as a commodity and sells kilowatt hours. All electricity generation needs to compete against all other sources in a market that is constantly searching for the lowest price at any given time of day. The result is a radical reduction in the cost to fuel a car that buys its energy off the grid.