It must be tough to be a speculator these days. Sure, there are possible riches to be had -- in the face of derisive comments from a public and government who see you as a market manipulator, or at least too willing to profit at the greater good's expense. Like the bondholders who got pilloried for fighting the Chrysler bankruptcy, oil speculators are increasingly coming under fire, and their days of easy speculation may be coming to an end.

The U.S. Commodity Futures Trading Commission (CFTC) is again focusing on speculation in oil and gas futures markets. Twice under the Bush administration, the commission released reports that found no evidence of excessive speculation. But now, new chairman and former Goldman Sachs (NYSE:GS) partner Gary Gensler is investigating ways to limit speculation and "ensure market integrity."

Setting position limits might be one approach. A similar system is already in place for certain agricultural commodities, not to mention the options market. But as it stands now, exchanges are generally allowed to self-regulate to prevent manipulation.

In addition, the CFTC is considering altering how it reports weekly trading data. New reports will likely have information on professionally managed futures, foreign contracts, and dealers such as JPMorgan Chase (NYSE:JPM) and Morgan Stanley (NYSE:MS), who currently classify themselves simply as "hedgers or speculators." These bankers may soon have to provide a more accurate picture of their positions.

The global demand for commodities is making regulation an international issue. On the heels of an analyst estimate that global economic growth decreases by 0.4% for every sustained 10% increase in oil prices, French President Nicolas Sarkozy and British Prime Minister Gordon Brown jointly penned an editorial in The Wall Street Journal calling for "improving transparency and supervision of the oil futures markets to reduce damaging speculation." They are expected to champion their cause at the G8 Summit.

Despite arguments that speculators help hedgers by creating a liquid market, I'm inclined to agree with the European leaders. This market functioned fine -- perhaps even better -- before hundreds of billions of dollars from financial institutions poured into it. And if you take into account the distorting effects of ETF contract rolls from products like United States Oil (NYSE:USO), the damage all those inflows did just looks worse.

I don't necessarily support more government regulation, nor instinctively think that the government knows best. But I do think that the oil futures market was never meant to be an investment vehicle, and that oil was not intended to be an asset class. It was created so that businesses needing to buy and sell oil could do so in an orderly manner. That brings us to the biggest problem here. Producers like ExxonMobil (NYSE:XOM), refiners like Valero (NYSE:VLO), consumers like Southwest (NYSE:LUV), and even oil-rich nations all need to budget projected oil-related costs or revenue. As the system currently (dys)functions, they simply cannot do so in an accurate manner.

Over the past 12 months, we have witnessed oil peak at $145 a barrel, drop all the way below $34, more than double in value to $73, and tumble down 16% to $60 in the past 6 trading days. If that's your idea of an efficient market made better by speculation, count me out. It's time for the speculators to go home.

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