Obama vs. the oil bubble

A financial regulatory overhaul could reduce huge swings in the price of crude oil and gasoline.

NEW YORK (Fortune) — Can reinvigorated financial watchdogs take a bite out of surging oil prices?

President Obama is scheduled to outline a regulatory reform program Wednesday that will, among other things, call for strong federal oversight of derivatives — side bets on changes in asset values or interest rates.

The reform push is being driven by the past year’s financial-system tremors, which were intensified by derivatives such as credit default swaps, or wagers on a bond issuer’s health. The administration aims to defang that demon by moving derivatives trading out of the shadows to reduce uncertainty.

But this year’s surge in the price of oil is turning Washington’s attention back to another derivatives debate: whether speculation in the futures markets is responsible for wild swings in the prices for crude oil and other commodities.

Fortune