Shell-shocked and befuddled members of Congress questioned why oil prices surged to $147/barrel last summer. They were assured by US oil and gas multinationals and by Wall Street that the "fundamentals" of supply and demand were driving prices up, not speculative trading.
Four months later, prices were cut in half when energy traders tied to the beleaguered investment houses pulled out of commodity markets or lost their jobs. Still, Congress was told that the bad economy alone explained the rapid price decline, not unregulated financial trading.
This is how the Congressional Oversight Panel described this phenomenon as it relates to the banking crisis: "Those commentators who most vocally raised doubts about the sustainability of housing prices, the pace of derivatives growth or lax regulation were largely dismissed as fearmongers, or as simply 'not getting it.'"
This also rings true when applied to last year's rollercoaster ride in the energy markets. Oil companies and hedge funds benefiting from a sort of Wild West trading in these markets dismissed Senator Carl Levin's use of the term "excessive speculation."
They had the quiet backing of commodity regulators who for months dismissed all calls on Congress to lift the regulatory exemption for electronic energy trading called the Enron loophole.
They continued to warn that requiring too much from financial energy traders doing business off of regulated exchanges would "stifle innovation" -- a line the financial industry has employed successfully since the 1990s.
The panel put it plainly. "In too many cases, regulators had the tools but failed to use them.
And where tools were missing, regulators too often failed to ask for the necessary authority to develop what was needed," said the report.
"Creativity and innovation are too often channeled into circumventing regulation and exploiting loopholes."
Energy prices will continue to fluctuate, pulling speculators back into commodity markets. Perhaps just in time to register with the federal government.