As American consumers are seeing prices of gasoline inch ever higher at the pumps, President Obama is calling for more oversight of the energy markets on Wall Street.

The President is calling for a five-step plan that would include asking Congress for monies to increase surveillance and enforcement staff for oil futures market trading, as well as monies to fund critical technology upgrades for oversight and surveillance of energy market activity.

Obama is also calling for increased civil and criminal penalties of up to 10-fold for parties found manipulating oil futures markets. Also, Obama is calling for margin requirements to prevent that manipulation and speculation on the oil market. President Obama told reporters in the Rose Garden this morning, “We can’t afford a situation where some speculators makes millions, while millions of Americans get the short end of the stick.” Buying on “Margin,” is the practice of buying futures on borrowed money. While it carries great risk, great profits can be made in this manner.

The oil market this year has seen an increase in prices that go hand in hand with non-commercial trading activity in crude oil futures. This activity drives up the price of oil purely on speculation. American consumers see the results at the gas station as the speculation becomes a self-fulfilling prophecy.

Speculation and margin buying generally do not take actual possession of the commodity traded on. It is usually rolled over when the delivery date comes due. But, speculation on a large scale, such is what is happening in the current market, drives prices much higher than they would be without it. Speculation creates artificial demand, and is usually bought on margin.

“Hedging” and “Hedgers” on the other hand, are buyers that actually take delivery of the commodity that they are buying. Hedgers include airlines and the like. Hedgers will also “short” their positions – these “shorts” bring balance to the physical oil markets avoiding the potential of future purchases inevitably raising prices.

Obama is asking congress for approximately $52 million to address this issue of speculating on borrowed money. By increasing the amount of actual money needed to buy “long,” thus increasing the risk to the speculator, discouraging the practice.

The average American consumer hears the term “Supply and Demand.” But, what they usually don’t understand is that this “artificial demand” is factored into that equation.

The White House said, “At a time when American consumers are feeling pain at the pump, it is critically important to ensure that illegal manipulation, fraud and market rigging are not contributing to gas price increases.”

Republicans seeking expanded domestic drilling have downplayed the role speculation plays in raising prices, or offer a take that’s different from Democrats’.

Some Republicans argue that expanding drilling to areas such as the Atlantic Coast and Alaska’s Arctic National Wildlife Refuge would lower costs by sending a market signal to speculators that more supply is in the offing, even if it is years away.

“Whether it’s Enron or any other case, you can point to areas where the lack of adequate oversight, the lack of cops on the beat, and the lack of serious rigor in overseeing these markets has been a serious problem for consumers,” the White House official said.

Crude oil prices rose another $1.64 to $104.57 a barrel earlier today.