USO ETF returns lag crude oil due to costly futures roll and tax complexities.

The United States Oil Fund (USO) has delivered only a 22.46% total return over the past decade, despite crude oil prices swinging dramatically from $16.55 to $114.84 and back to $84.65. This underperformance is due to the fund's strategy of holding front-month futures contracts and rolling them monthly, which incurs a 'roll decay' cost when the futures curve is in contango. Additionally, USO investors face tax complications with Schedule K-1 forms and a unique tax treatment under Section 1256. Recent geopolitical events have caused price volatility, and the fund's structure makes it more suitable for short-term trading rather than long-term holding. Alternatives like USL, DBO, BNO, or energy-sector equity ETFs offer different risk and tax profiles for oil exposure without the same roll costs.