NYT columnist:

"...The price of energy spiked Ñ tenfold, a hundredfold Ñ despite low demand. Californians became the most efficient users of power in the nation, and still suffered through dozens of rolling blackouts. None of it added up.

And into the worst energy crisis since the Arab oil embargo of 1973 came Vice President Dick Cheney, blasting conservation as a sissy virtue and saying the nation needed to build a new power plant every week for the next 20 years.

The administrationÕs neglect was breathtaking, a harbinger of what was to come when a natural disaster, Hurricane Katrina, would do to Louisiana what a man-made disaster had done to California. We now know, of course, that the problem eight years ago was caused by manipulation by Enron and other speculators who gamed a faulty system, sticking it to Grandma Millie while laughing at how easy it was to rob 40 million people.

Now consider the present dilemma: oil doubling over the last year, gas at $4.50 a gallon in places and the oversized influence of speculators in a market where few used to tread. Big investors are free to run up oil futures contracts thanks in part to former Senator Phil Gramm. He is the Texas Republican who co-sponsored the so-called Enron loophole in 2000 at the behest of what was later found to be one of the nationÕs biggest criminal enterprises.

Enron may be gone, but its legacy lingers in the work done by politicians who did its bidding. And Gramm, who once told corporate contributors, ÒI have the most reliable friend you can have in American politics, and thatÕs ready money,Ó is now the chief economic adviser to Senator John McCain.

GrammÕs role in helping to unleash energy speculators has been well-documented in recent months, and Senator Barack Obama has made an issue of it. Both Obama and McCain have called for closing the loophole. But just how big a role that kind of global gambling plays in the overheated commodities market is only now coming to light.

Testifying before the Senate on Wednesday, the ever-knowledgeable Daniel Yergin blamed speculation for part of the run-up. Yergin, an author and the chairman of Cambridge Energy Research Associates, and pointed to numerous other causes, as have other experts.

But he also noted that 2007 may have been the peak year for oil demand in the United States. In other words, the worldÕs largest energy consumer has reached the height of its gluttony, and will be using less oil from here on out.

Keep that in mind when thinking of the parallel to California. Less demand from the biggest consumer, yet record high prices. Why? Yes, tight supply during the end stages of the 200-year reign of fossil fuels, higher use by China and India, and global troubles all contribute to the bloat of oil prices.

But market manipulation seems obvious.

Over the last five years, investment in index funds tied to commodities like energy and food has gone from $13 billion to $260 billion. At the same time, the prices of those commodities have risen 200 percent.

Take away the excess speculators who are in the market purely for the ride, and oil prices could drop by half. ThatÕs the view of Michael W. Masters, a hedge fund manager whoÕs been advising Congress this year.

ÒThere are no lines at the gas pumps and there is plenty of food on the shelves,Ó said Masters, whose testimony has been widely discussed in financial circles but rarely in the political realm. What has changed, he said, is the presence of big speculators making futures bets."