Earlier on Wednesday, Michael Masters, the respected hedge fund manager turned 90s commodities icon, testified before the Senate just as crude oil was soaring another $4 in intraday trading. Masters effectively said that new forms of speculation are now as instrumental as simple demand in driving the price increases we’re seeing.

His solution? Keep pension funds from investing in oil (as well as other commodities) and make it harder for financial institutions to forgo limits on speculative positions.

While Masters is “on to something,” as far as commodities trader Dennis Gartman is concerned, much of his solution flies in the face of free market fundamentals. What we need to do, according to Gartman, is make it harder for speculators to take oil and other commodities off the market by “storing” them for long-term positions. That is the crux of the problem with speculation, he said, and when you add that into a mix of new demand from China and India and emerging markets, it creates a perfect storm for prices.

The U.S. government actually did the right thing by deciding to halt additions to the Strategic Petroleum Reserve, Gartman said. But in order to actually prick the oil bubble and send prices back to reality, something much more drastic would have to be done. Gartman said if it were up to him, he’d be selling 100 million barrels from the SPR, but the chance of the President doing that is slim, he said.

Until the bubble is pricked, this perfect storm will continue to transform into a hurricane, he said.

For crude, it looks like the sky’s the limit.

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Gartman Owns (QQQQ), (FXE), (GLD), (CEF), (BPT), (SDS), (DIS), (AGU), (RIMM); Gartman Is Short (BAC), (WFC), (WFMI); CIBC Gartman Index Is Long Hang Seng China Enterprises Index; CIBC Gartman Index Owns Copper, Aluminum, Sugar, Corn, Soybean, Natural Gas; CIBC Gartman Index Is Short Crude Oil; CIBC Gartman Index Is Short 10 Yr. U.S. Treasury Note

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