A fair question...

Ryan asks: "At what percentage of the economy must it effect before it becomes "too vital" for average rules of trading/speculation to apply?"

I can't say where I'd draw the "vital" line, but I'm not sure we need to. There is no other commodity bought, sold or traded on an open, global market that is as vital and integral to our society as crude oil. No facet of our society doesn't depend utterly on a constant (growing, actually) flow of crude oil, and we can supply domestically only about 65% of that at best, right now.

There aren't many parallels in history that I can point to, but I'll try...

Many past societies depended on a constant annual harvest of a single cereal grain, because the benefits of crop rotation and multiple crop planning were unknown, for the most part. Persia, Greece, Egypt and Rome are all good examples of societies that hung their collective hats on the production of one primary annual commodity... wheat. Given an adequate wheat harvest, the various empires could expect to maintain their power for at least another harvest cycle. Rome, in particular, used wheat as a measure of success. Throughout the entire span of Imperial Roman history, we see the daily "bread ration" made to the people of Rome from the Emperor. Whenever that ration fell short, or the "wheat" was substituted with rye or barley, we see riots, unrest and turbulence in the streets.

18th and 19th Century Ireland is another good example. Ireland had become utterly dependant on the potato as the primary source of nutrition for the 4+ million people living on its shores, and when, in the 1840's, the dreaded blight hit the potato plants year after year and destroyed the crops utterly, millions died and millions more fled the island for better lives somewhere else.

The big difference here is that our current dependence on oil for energy means that no facet of our lifestyle as a nation, from food production to daily business routines, can be performed without the oil. Farmers need it to grow food, businesses need it to provide services, citizens need it to live their lives, the nation needs it to function. Remove 35% of our crude oil supply tomorrow, and what 35% of our daily lives are we willing to sacrifice to maintain order and security? That would constitute a greater reduction in consumer oil supplies than was seen during WWII and the rationing of goods and services to maintain and win the war effort. The rationing effort was geared to save the nation between 10% and 22% of "vital" resources that could be redirected from the consumer markets to the military/industrial markets, and chief among these was (surprise!) crude oil. Gasoline, diesel, kerosene... all rationed according to government guidelines to maximize supplies for the war effort... but at its peak it only reduced non-military consumer supply by 22%, and our estimates of what would happen if our imported oil got cut off is a loss of at least 35% of our demand.

Taking that estimate across-the-board, we'd see one-third of our heating oil, gasoline, diesel fuel, lubrication oils, plastics and petroleum products supplies evaporate. How disruptive do you think that would be to daily life in America, if the worst-case did happen? What facets of our society would get the needed oil, and what facets would be denied? Maintain transportation demands, and people can't heat their houses in winter. Keep the fuel oil flowing, and farmers can't harvest crops or get them to consumers. Maintain the military demands, and the private sector walks to work seven out of ten days.

My point is that we are at a very-nearly unprecedented point in human history... the very fabric of our society, from pole to pole, depends on ONE SINGLE, FINITE COMMODITY... crude oil. We can probably live within our ability to generate electricity from coal (barely), but not without oil. When that much of our livelihood depends on one commodity, that commodity is no longer something that society can simply assume will be available when we demand it. Allowing speculators to work markets as a means to larger profits while the rest of the country sees their profits and earnings being consumed by higher costs in fuel and energy... where is the benefit to our society as a whole? Isn't the regulating of a small percentage of our economy less painful over-all than not having the regulation and seeing the bulk of our economy suffer from a disparity in supply-and-demand pricing?

I shouldn't have to remind anyone here that the latest gas price spike saw NO MEASURABLE DECREASE in crude oil supply... at all, anywhere in the world. In fact, every oil producing nation on the face of the earth (including the US) increased oil production to cash in on the higher prices. So, if there was more oil then ever in '07/'08, why the spike? Because the money behind the markets were playing guessing-games with what tomorrow's prices would be, and the average Joe paid the price at the pumps. This practice is allowed in the US, where the three largest commodities markets exist and move the vast majority of all oil contracts on the globe.

If the world sees a shortage of oil, and prices rise... that's the fundamentals of a free-market system. Supply and demand dictate cost... Adam Smith at his most basic. That is NOT how a speculation futures market works, and while I don't begrudge anyone their fair wage for effort made... when it comes to something as vital as oil is to our world, I'm willing to see security trump profit.