WASHINGTON — Critics say federal regulators have long let speculation in energy markets inflict financial pain: triggering wild price swings, hurting gasoline wholesalers, damaging airlines and squeezing consumers.

Now, in a major shift, regulators are considering imposing quantity limits on speculative trading of energy futures contracts. The futures contracts are supposed to lessen price volatility. But speculators use them to bet on market prices, and critics say this magnifies price swings.

The Commodity Futures Trading Commission will begin hearings Tuesday to gather views from consumers, businesses and traders.

"I believe we're going to do something," Bart Chilton, one of the four CFTC commissioners, said in an interview. "I would be extremely surprised if we don't take some action to set hard limits" on energy futures contracts held by speculators, as well as those in metals.

CFTC Chairman Gary Gensler sounds less certain about the outcome. But Gensler says, "My firm belief is that we must aggressively use all existing authorities to ensure market integrity and efficiency."

Agency spokesman Scott Schneider said that if the CFTC adopted new restrictions, it likely would happen in late summer or early fall. Specifically, the agency is weighing whether to restrict the amount of trading in energy futures by those who are solely financial investors.

The free-market sentiment that held sway in Washington for years helps explain why regulators kept their hands off the volatile oil futures markets. The Bush administration generally opposed tighter regulation in the financial industry.

Though the CFTC is supposed to be independent and insulated from politics, "there were people appointed to the CFTC who were part and parcel of the philosophy of the Bush administration," said Sen. Byron Dorgan, D-N.D.

Another reason why the agency's hands-off approach prevailed for so long, critics say, was the deep-pocketed financial industry and its lobbying muscle. The industry opposes new limits on speculative trading, arguing they would crimp the cash flowing through the market and drive business overseas.

The industry has spent scores of millions of dollars in recent years lobbying Congress and the federal government. For example, Wall Street's biggest trade group, the Securities Industry and Financial Markets Association, spent about $1.4 million lobbying on all issues in the third quarter of last year — when public anger over spiking oil prices escalated and Congress seemed poised to act.

"Wall Street has had a profound influence on" agencies such as the CFTC, Dorgan said in an interview.

Companies and groups don't have to itemize how much they spent for lobbying on specific issues. The SIFMA filing for that quarter mentions oil speculation and related legislation and the CFTC. Lobbying reports for the quarter by JPMorgan Chase & Co. and Goldman Sachs Group Inc., two big players in the oil futures market, make similar listings.

"I think we weren't inquisitive enough, and we weren't diligent enough in our oversight," said Chilton, a CFTC commissioner since mid-2007.

Gensler's confirmation was held up for months by senators who felt his stance had been overly deregulatory when he served in the Clinton administration's Treasury Department. But now Gensler seems eager to cast himself as a tough overseer.

And among hedge funds and Wall Street banks that invest in and manage billions in commodities trading, the shift to a Democratic White House has raised fears of tighter regulation.

Scott DeFife, senior managing director at the securities industry group, argues that trading by speculative investors helps inject liquidity into markets and establish accurate pricing.

"Instituting arbitrary position limits and other curbs to market participants could be counterproductive and force a larger share of the market into a smaller number of hands," DeFife said in a statement.

Gary DeWaal, general counsel of the investment firm Newedge USA and a former CFTC enforcement attorney, argued: "There's economic McCarthyism going on. Politicians have invented a term that's meant to scare people: excessive speculation."

DeWaal's firm acts as a broker to clients, including banks, that both hedge and speculate in the oil futures market.

Experts and economists are divided on whether speculative trading in the futures markets fans price volatility. Part of the confusion is that "hot" speculative money flows into energy commodities in numerous ways. The CFTC doesn't track all of them. So it's hard to quantify the impact of speculation.

The agency doesn't, for example, keep records of the speculative side bets that traders make. Nor does it monitor markets that include over-the-counter swaps — those that aren't traded on exchanges — by pension funds and other investors.

"Reducing speculation won't make (oil) prices higher or lower," said Robert Weiner, a professor of international business and international affairs at George Washington University.

Speculators tend to be evenly split in the positions they take on a given day, Weiner said, and "they don't act like lemmings, all doing the same thing." Critics wrongly tend to equate speculation with price manipulation, he said.

If the CFTC limited the volume of futures contracts speculative traders could hold in crude oil, heating oil, natural gas and gasoline, "It's very unlikely that it would change" prices, Weiner said.

On the other hand, some traders and brokers gripe that funds traded on exchanges, such as the United States Oil Fund, have pumped billions into energy commodities — enough to artificially boost prices.

Benchmark crude oil prices have roughly doubled since March — even though government reports show U.S. supplies brimming with surplus oil. One reason is investors have been buying oil barrels on the expectation that the economy will soon improve.

Some investors are also buying crude oil to hedge against inflation: They're betting the dollar will weaken and push up prices of energy commodities.

Consumers have been hurt as retail gasoline prices have crept up, even though U.S. supplies have swelled for six weeks in a row — evidence, critics say, that speculators are to blame. Pump prices rose last week to a new national average of $2.47 a gallon, according to several data services.

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"SOS: Stop Oil Speculation!" cry Web sites put up by trade groups representing airlines and oil marketers, who feel outlobbied by Wall Street.

Industries that consume huge volumes of heating oil, gasoline or jet fuel can hedge by buying contracts at different prices for various times in the future. Hedging provides insurance against sharp price swings. But when prices leap and drop within a short time, they can move before the users have time to unwind hedging positions they have taken.

Some lawmakers, such as Dorgan, are holding out the option of legislative action if the CFTC doesn't impose restrictions to their satisfaction. Steps could include new trading limits or collateral requirements, he said.

AP Energy Writer Chris Kahn in New York contributed to this report.

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