Bring 6 quarts of water to a boil and add the onions. Lower to a simmer and cook for 5 to 7 minutes. Drain and peel.
Meanwhile, in a saucepan, warm the olive oil with the bay leaves while the onions are cooking.
Turn the peeled onions in the olive oil and cook for 5 minutes, until just browned. Add the vinegar and sugar, raise the heat slightly and cook, stirring frequently, until the vinegar-sugar mixture starts to caramelize, about 2 minutes. Remove from heat and discard bay leaves. Turn the onions gently to coat thoroughly with syrupy mixture.
Season with salt and pepper, and set aside to cool. Serve at room temperature.