It's never been easy for speculators.

First, there's that pesky little problem of correctly forecasting price movements. Then there's the wrath. Lately, market participants and legislators have been trying to pin the blame on speculators for the price contortions that have roiled the energy markets.

Last year's congressional hearings (see "Congress Blames Index Speculators") put the Commodity Futures Trading Commission (CFTC) in the hot seat, as lawmakers wagged their fingers at the agency for failing to rein in the seemingly indiscriminant buying of energy futures by hedge and index funds, as well as the loophole-diving of swaps dealers. Leading the charge for tighter regulation was Rep. Bart Stupak (D-Mich.), chair of the House Energy and Commerce Subcommittee on Oversight and Investigations.

Under pressure from Stupak's subcommittee, the CFTC set to work studying the influence of these speculators on energy prices. Analyzing market data from the first half of 2008, the commission determined the sharp rise in the value of crude oil index positions had not resulted from hand-over-fist buying, but rather from supply constraints in the underlying market. Additionally, the CFTC study found that over-the-counter swap transactions - even when aggregated with on-exchange futures - hadn't influenced oil prices.

But Stupak was singularly unconvinced by the commission's analysis. The Michigan congressman got another chance to take a swipe at speculators when he testified, oddly enough, before the very agency he excoriated last year in the round of CFTC hearings that concluded Wednesday.

The commission has solicited testimony to suss out market participants' views on a number of potential regulatory reforms. Paramount among them: the establishment of federally mandated position limits for speculators in the energy markets.

Under current law, the CFTC sets limits for only certain agricultural commodities, leaving it up to the exchanges to control the size of speculators' holdings in other futures. Exchanges impose so-called accountability levels to identify and control traders with large positions. But unlike the hard limits imposed under federal regulations, these accountability levels are porous, prompting CFTC Commissioner Bart Chilton to describe them as "suggested speed limits."

CFTC chairman Gary Gensler has called on his agency to "seriously consider setting position limits in the energy markets" and vowed that the agency would "urgently work with Congress to secure additional authorities" to strengthen oversight over other derivatives trading.

Gensler also pooh-poohed reports that a new CFTC analysis of index trading, due out later this month, would reverse the commission's view on last year's speculation.

For his part, Stupak wants position limits, but not just at the exchange level. He wants aggregate position limits set across all exchanges in which a commodity may trade. That way, he says, traders can't play one exchange against another to build massive positions.

However, Stupak doesn't want to eliminate speculation - just to curtail it. In fact, he acknowledges the necessity of speculators as a source of liquidity. "Speculation is OK, I understand that," Stupak told the Detroit Metro Times last year. "You're always gonna have speculation. But excessive speculation by those who have nothing to do with the oil industry is driving up energy costs for families and crippling our economy."

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