Regarding the reports today concerning federal regulators considering new curbs on oil speculators, you have to ask yourself what changed in the world between last week and now to drop the oil price from 76 to 62. How would you feel if your personal bank account dropped by that big a percentage in a few days? The volatility in energy markets is extreme and remarkable.

I don’t have a serious problem with any of what’s being said thus far, although I don’t think it’ll make that big of a difference. The major industrial players already use the futures markets for the reason that God invented them: to add some predictability to their capital requirements.

Cue conventional wisdom: “The speculators play an essential role by adding liquidity to those markets.” Yes, it’s true that they create liquidity. How much liquidity, though, is really essential for the smooth functioning of these markets? I think we might do just fine with considerably less of it.

However, even if we curb the activities of the highly-speculative traders, you’re still not getting at the root of problems like last year’s run-up to $147. That wasn’t triggered by short-term traders. It happened because a lot of professional investors, the kind who spend most of the day buying Treasury debt, decided that commodities are an asset class, rather than just a production factor. The thinking that underlies this is still sound and still compelling, which means we could easily get another massive oil-price spike even without more regulation.

Not that the White House wouldn’t welcome much higher oil prices. They just passed a big cap/trade law intended to accomplish basically the same thing.