“Compared to Ford and Carter, the SPR experienced a ‘Reagan Revolution’ – although hardly of the free-market variety. Two reasons explained Reagan’s bullish SPR [buy and fill] policy. First, the reserve was the centerpiece of Reagan’s ‘free market’ energy policy, which precluded the need for standby price and allocation controls to deal with future emergencies. Second, the reserve was an instrument of foreign policy should U.S. intervention and confrontation lead to reprisals by oil-exporting countries as it had in 1973 and 1979.”
“With the Reagan acceleration at a time of record crude prices, the reserve program became a major cost item, and with budget deficit problems, a group of proposals came forth to reduce cost while maintaining fill rates. Global settlements with refiners accused of product price overcharges was one tapped source.”
The fill rate of the reserve has never been far from controversy.…
Government does not only buy high and sell low (be sure and compare the purchase prices and the selling prices, adjusted for inflation to see the taxpayer loss, not to mention the high-cost of the whole storage operation). Government projects, particularly rushed, politicized ones, are extremely inefficient.
Consider this litany of problems plaguing the federal crude-oil storage program.
“In the first week of the program, three sites in Louisiana were acquired by the Corps of Engineers by eminent domain. Pipeline right-of-way was similarly acquired; appraisals below industry standards made condemnation necessary. This, however, did not reduce costs or trim start-up time as intended. The associated legal proceedings increased costs and created delay, and condemnation set the stage for political trading between Louisiana and federal officials in Washington, D.C.”
In the first decades of the twentieth century, fears of an imminent exhaustion of oil led to petroleum land withdrawals and the reservation of oil-rich acreage for future military use. Four Naval Petroleum Reserves were set aside between 1912 and 1923.  With the discovery of major new oil fields in Oklahoma, Texas, and California in the late 1920s, the new fear – at least for the vested parts of the oil industry – became oversupply.…