...is Northwestern economist (and FLUBA e-mail pal) Lynne Kiesling in rebutting John Irons' claim:
...higher prices may be the result of standard supply shocks of the type that one sees in an introductory economics course, but then again they might not. The energy price spikes in California during the 2000-01 electricity crisis turned out to be market manipulation by Enron, and provided a stark example of how markets can be manipulated for private gain.
The lady pancakes him:
John, you should know better than to rattle my cage about the causes of the California electricity crisis! The real blame in such a controlled-and-managed market rests with the policy makers who designed the rules and implemented them without good (dare I say experimental?) testing in advance. Oil and gasoline markets, both financial and retail, are more organic than that. They are also sets of integrated spot and forward markets, with participants using forward contracts, options, derivatives, and other contractual innovations to lay off risk on parties who are willing to take it. Those integrated, organic markets insulate most of us from most of the economic shocks that would accompany having to deal with volatile commodity markets in real time.