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.

1. The rush to fill leached salt domes led to design problems, cost overruns, and poor planning “worthy of a defense contractor.” [1]
2. Expensive “ad hoc” barge transportation was chosen over cheaper term pipeline transport. [2]
3. Fixed-price oil contracts in a declining market left middlemen with handsome arbitrage pro­fits at taxpayer expense. [3]
4. Misestimated sched­ules overcommitted oil to storage sites; by the end of 1978, demurrage costs had reached $7 mil­lion. [4]
5. Quality control problems allowed as much as 9 million barrels of lower grade crude to be substituted for higher grade contracted crude.

“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. [1] 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.…