Congress vs. the Oil Speculators

It seems that Congress is finally going to crack down on excessive speculation in the oil market now that oil is finally starting to fall.

It would provide more resources and authority to the Commodities Futures Trading Commission to detect and punish speculation, stop speculators from using foreign markets to manipulate the price of oil in the United States, require more transparency in oil markets and limit the trading of market players who do not intend to take delivery of the oil they purchase.

In particular, the bill will give the CFTC greater power to regulate the "swap" market for futures and differentiate between "legitimate" and "illegitimate" hedge trading that, the Democrats say, has lead to increased prices.

I wonder how much they are limiting "legitimate" hedge trading to people that are going to take the actual delivery of oil? That would seem to make the market less liquid because there are far less players who would have access to the market. In this case we might see bigger price swings since there aren't as many traders that would be able to soften the ups and downs.

Hopefully this legislation will prevent pension funds from using their vast resources to chase after returns in the commodity markets. We may actually see oil come down to below $100 if there isn't a war with Iran or any hurricanes stopping supply in the Gulf of Mexico.