My response to Ryan...

Ryan writes, "If Chicago is shut down as the world's oil speculation "capitol", wouldn't London, Moscow, or Riyadh simply take its' place(?)"

Honestly, for all I know, the very speculation I am talking about may already be practiced there... the BIG difference is that Chicago, New York and Kansas City maintain more than 75% of ALL global crude trades, leaving the other 25% to be spread around the various other commodity markets. It is the FACT that we broker such a vast majority of all crude contracts that our rules and policies have such an impact on what happens to the price of oil around the world. That, and we are the largest consumer of crude oil and its by-products on earth all mean we are a prime player in the manner in which it is traded, if not in how it is produced (more's the pity).

By the way... this is true for just about EVERY commodity on earth, and for more than 60% of all stocks and bonds, too. New York's Wall Street truly is (with no exaggeration) the heart-beat of the global economy, and when it has pains... the whole world feels them.

Ryan continues... "If crude futures speculation was legal and applied then, why were these deleterious effects you lay at the feet of speculators not occurring then?"

You are correct when you say that "oil was damn cheap in 1955". In adjusted dollars, the average price for a barrel of crude for that decade was less than $14, with a high if $19 and a low of $7. What is missing from your question, though, is "How much of our oil needs were from foreign sources in 1955?" and that answer would be less than 5% of our entire NATIONAL consumption came from foreign sources in 1955, while 55 years later, we see that figure rise to more than 35% of our daily requirement. Thus, I am confident (but have no direct evidence to prove my point) that if a "crunch" occurred in 1955 and the nation found itself unable to pay the $14/barrel price, the needed additional 5% of our national demands could be gained from increasing domestic production by an additional 5%. This could very well have brought the price of gas up relative to the higher cost of oil... but when you are talking about the increase being less than 2% of total cost, and gasoline at the pump was ten cents a gallon... even in unadjusted dollars, that is an increase at the pump of .02 cents per gallon. You'd have to buy 50 gallons to see a one cent increase in cost.

Now, in today's markets, if we see an increase in the price of crude from $100/barrel to as high as $110/barrel (10% increase), the cost of a gallon of gas goes up 17%, or nearly $0.32 a gallon. The 2008 high for the last big price-speculation spike was $159/gallon, which gave us our national $3.79/gal gasoline prices.

So, your point is valid, and if it is bad now, why wasn't it bad then? Perhaps it was, but what the nation paid in gross percentage of revenue for its crude oil needs in 1955 was so far below what we pay now, that (as I said) fluctuations in market price didn't have the effect then that they do now. I'm not saying our grandparents didn't balk at paying $0.12 per gallon rather than $0.10 per gallon... I'm sure they did. I'm saying that increase didn't have the same cost-effect on our economic vitality that a 20% increase in the cost of gasoline has today. The same increase today is the difference between $3/gallon and $3.60 a gallon... and that increase today would have real, measurable effects on how our economy performs over the course of a year.

On the topic of currency speculation...

Currency speculation, in the United States is a Federal crime that carries a minimum of 5 years and $100,000 in prison for a conviction. Your description is of a currency market, which buys and sells volumes of foreign currency at current value against the dollar (if we are talking about the American currency markets). This is a radically different thing than a commodity market, because a commodity (by definition) is a marketable good that is the same regardless of where it is produced. An ounce of gold produced in Nevada is exactly the same as an ounce of gold produced in South Africa... but the only place that a Euro is produced is the EU, and the only place that a US dollar is produced is the US. There is a finite amount of dollars/Euros/pounds Sterling/rubles/drachmas/yen/etc in circulation at any given time, and the purchase value of those currencies is based on many factors, but the biggest is how many bills there are in circulation. When the Fed reduces the printing of money, the purchase power of the dollar goes up, but our ability to spend money is reduced (as a nation). When people say that Obama is spending money like it is going out of style, they are closer to the truth than they know... he is spending the dollar right out of "style" across the globe, because he is printing the money he is spending on demand. He is NOT spending money that actually exists NOW.

All hyperbole aside, I didn't ever actually take the historical factors back further than Reagan. When I look for some historical example of regulations that WORKS, there doesn't seem to be any need to go back further than needed... and that would be the Reagan Era of crude oil regulations. Between 1981 and 2001, I can't find ONE example of a spike in crude oil prices that wasn't driven by a demand/supply issue ('91 Iraqi invasion of Kuwait, for example), but since 2001, we have seen three spikes that had no measurable relation to supply/demand at all, the last being the biggest in 2008 when oil hit the $150+/barrel mark for the first time EVER. Production was at an all-time high, and so were prices... that ALONE tells you something was off-kilter in the "market" doesn't it?

One more point from me, then I'll quit:

In 1961, the Organization of Petroleum Exporting Countries (OPEC) is formed and proceeds to flood the oil markets with cheap, plentiful crude oil. By 1975, this flood of oil constitutes more than 1/3 of ALL OIL PRODUCED IN THE WORLD from only 16 relatively small countries. This means that it was cheaper for big oil to buy crude from OPEC than it was to drill it out of the ground in places like Texas, Oklahoma, Pennsylvania, Louisiana, or Alaska, and we begin to see the end of our domestic oil production capacity as the primary source of our oil needs.

Then, the production rates from OPEC were cut, and the price of crude went up. By 1980, the revenues to OPEC members had increased by 200% and the cost of a barrel of crude to the US markets had gone up, too. Gas lines, oil crisis, national malaise and recession result. However, before such time as the US could increase its own domestic production to compensate... OPEC drops the prices by doubling production and flooding the market again.

Perhaps Reagan saw the writing on the wall, and thought that domestic production rates would remain low or fall further, and that was why he was such a champion of a "supply-demand" priced market for oil... I don't know. His curbs, however, show us that regulating the manner in which oil is traded and priced keeps the consumer costs of oil and petroleum products on a far smoother curve than speculation pricing, and since such curbs and regulations have worked in the stock markets since 1930 (there hasn't been a true "depression" since 1932, after all), and we know speculation regulation worked from '81 to '01, why are we continuing to argue this?