I suggested a few weeks ago that rising crude oil prices along with seasonal demand and fuel requirements were the primary cause of this spring’s hike in U.S. gasoline prices. As Menzie noted yesterday, refining margins are clearly also now making an additional contribution. Which reminded me to look into the current status of the now decade-long effort of Arizona Clean Fuels to try to build a new refinery.
Shutdowns due to events such as a fire at BP’s Whiting, Indiana refinery and a boiler problem and steam outage at their refinery in Toledo, Ohio have led to significant reductions in gasoline inventories and increases in prices. But why don’t we have more spare capacity to cope with these kinds of problems?
Half the refineries that operated in the U.S. in 1976 have since been closed without a single new one built. Arizona Clean Fuels finally gave up in 2003 on their efforts to get all the permits for construction of a new one in Maricopa County, Arizona, and instead acquired property in nearby Yuma County for which they finally succeeded in obtaining the necessary permits from the Arizona Department of Environmental Quality and the U.S. Environmental Protection Agency. However, this month the plan ran into a new roadblock from a lawsuit filed by the Quechan Indian Tribe, whose reservation is apparently 40 miles away from the planned refinery. The Associated Press carried this story:
The Quechan Tribe has filed a lawsuit in U.S. District Court here that claims the federal government did an inadequate environmental review of artifacts and cultural resources before transferring the land.
The 3,500-member tribe wants to “prevent further destruction of Quechan cultural sites and resources” and force the federal government to follow environmental- and historic-preservation laws that govern such land transfers, according to tribal attorney Frank Jozwiak.
Once the tribe is satisfied that its historical and cultural interests are identified and appropriate steps are in place to protect and preserve those interests, Jozwiak said the tribe will not oppose the land transfer or the refinery.
The above AP story also reported that the District Court judge had ordered a temporary halt to construction. However, Arizona Clean Fuels officials tell me that this claim by AP was erroneous, repeating an error from an earlier story in the Yuma Sun without noting the correction that the Yuma Sun subsequently issued. The actual facts (according to the Yuma Sun) are as follows:
The defendants filed a voluntary standstill stipulation that stated that they would take no action on the property until a hearing was held….
With the recent court hearing, the defendants agreed to the temporary restraining order sought by the tribe, said Frank R. Jozwiak, the attorney representing the Quechans in the case.
All parties agreed to not transfer any more land and not conduct any ground-disturbing activity on any of the transfer lands, including land already transferred, until June 30, Jozwiak said, or until the court issues its decision on the tribe’s application for a preliminary injunction while this case is pending.
One can certainly understand the decision by the company to postpone further construction, as you realize the tremendous costs that would be involved when you begin a project of this size and then watch it all hang in limbo as one court case after another gets debated.
What if we’d had this refinery’s planned 85,000 barrels/day of gasoline online right now? That would represent a little less than 1% of total U.S. demand. In an environment like the present in which refining capacity may be the determining factor driving retail prices at the margin, with a short-run demand elasticity of 1/3, a 1% increase in quantity supplied would translate into a 3% reduction in price, or 9 cents per gallon using the current U.S. average retail price of $3.16 a gallon.
Admittedly, that calculation is a bit misleading, because it ignores the potential significant smoothing of price fluctuations that should come from adjustment of inventories and imports. But it does highlight the fact that, when those adjustments are working imperfectly (as they appear to be at the moment), even one more refinery could make a lot of difference.
Hope you’re enjoying those cultural artifacts.
Technorati Tags: gas prices,
gasoline prices,
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It is past time to cut lawyers and judges out of the process. They have nothing useful to contribute.
While imports of finished gasoline are growing rapidly:
http://tonto.eia.doe.gov/dnav/pet/hist/mgfimus1A.htm
they are … around 3% of the total consumed?
“It is past time to cut lawyers and judges out of the process. They have nothing useful to contribute.”
Yeah, and all those voters too. They always get in the way–of something or someone. Where’s Hobbes’ absolute sovereign who can set things straight when you need him or her? (Hobbes was fairly advanced for his time with respect to women’s rights–her may be appropriate.)
Regarding the refinery, I’d like to understand the larger picture. It’s easy to cherry pick a particular project to make a point. What are the majors doing? Are they trying to build refineries? Are they trying to expand?
According to this article:
http://www.corpwatch.org/article.php?id=12227
More new capacity will come from expansion, not new refineries. That’s what the majors say. And the president of the National Petrochemical and Refiners Association seems is saying the same.
And what’s this article telling us?
http://www.azcentral.com/arizonarepublic/business/articles/0419biz-refinery19.html
In particular, we’re told that, at the time of writing, they didn’t even have a coherent business plan?
If we need more refineries, or more capacity, I’m all for it. But I’m concerned about cherry picking of an issue to make a particular point. Is there more going on than cultural artifacts?
Arizona Clean Fuels? Come on, how stupid do they think we are. Is this like Bush’s “Clear Skies” initiative that aims to weaken the Clean Air Act and his “Healthy Forests” plan which aims to prevent forest fires by clear cutting them?
JDH:
I find it quite strange that you are linking to the Hughes, Kittel, Sperling paper to support your assumption of price elasticity of -1/3 when the whole point of that paper is to assert that gas demand is now much more inelastic (something I also infer from the data). They estimate more like -1/20 for price elasticity in the 2000s.
Refinery/retail margins have been anomalously high in the last couple of months – currently as much as fifty cents over what a straight oil price only model would predict. Much of that premium might disappear if we had another couple of refineries (or the ones we had were all working). (Although the considerable trade in products suggest we really need to analyze this on a global basis, not a US-only basis).
Gas would still be pretty expensive however, since crude is expensive before the refiners even get started on it. All the refineries in the world will not make more crude.
PS: My thoughts on why gas prices have risen are over at The Oil Drum.
Stuart, I use 1/3 rather than a smaller value for the elasticity because I wanted a number that is conservative and defensible. True, if you use an elasticity like 1/20 you can get a huge effect like 60 cents a gallon. But when you start talking about those kind of magnitudes, surely the supply response (through import adjustments) would dominate the demand response. My purpose in performing the calculation here was not so much to claim that 9 cents per gallon is exactly what would happen, but simply to point out that, under certain conditions, we are talking about something potentially big enough that ordinary Americans could really notice it.
Arizona Clean Fuels, doesn’t appear to be anything other than an idea, they don’t have the billions it would take to build a refinery.
Investors would be crazy to put money into it since Mexican oil production is projected to diminish.
Refineries were shutdown in the past decades due to a glut in supply. All throughout the 90’s the chemical and oil industry was complaining about over supply.
Currently, refineries are finally making money, and huge refinery construction projects are underway around the world. The major US oil companes aren’t building new refineries since they were badly burned by the past supply glut, and the makings of a new supply glut appears to be in the future.
Hmm. Energy Outlook says I was wrong, and we get about 12% of our finished gasoline from imports.
I actually have experience with ACF. Quite a few of my retired colleagues in the refinery equipment business have retired to Arizona, and many of them are consulting for ACF.
ACF is more of a startup/ venture capital business model, rather than one with a lot of industry backing. They’re the Apple of 1977 vs. IBM, if you will.
Should that fact make you take them more or less seriously? I don’t know. Startups have a horrendous failure rate, don’t they? On the other hand, how much economic progress have they generated in the last 20 years?
All the refineries in the world will not make more crude.
True as far as it goes. But by throwing capital at existing refineries, more higher value product can be made from lower value product. More gasoline, less asphalt.
Shoot, if we wanted to go to an all out “hydrogen economy”, refineries could be upgraded to strip all the carbon out of the hydrocarbons. That would be the ultimate refinery.
All it takes is capital.
As I’ve said, I think “elasticity” is a poor predictor. It’s a snapshot, and it isn’t always obvious what’s behind it. As a case in point:
“Nearly 80% of People Believe Gas Prices Have Been Manipulated”
You know, if people think these are temporary prices, manipulated or not, and that (that painful old phrase) “they’ll return to normal” … what do you expect?
Does the “elasticity” reflect what people feel is a “pinch” or what they feel is a “trend?”
If that survey is right, not only do people think it’s a pinch, they think it’s robbery.
From Robert Merting:
According to ConocoPhillips, refining and marketing profits for the third quarter of 2005 were 9 cents per gallon with an average price of $2.60 per a gallon of gasoline. Without trade limited by a tariff on gasoline, profits would be squeezed, roughly, to 8 cents a gallon. Thus the tariff increases refineries’ profits by 12.5%, or 1 cent on the gallon.
As any entrepreneur knows, a 12.5% increase in profits is remarkable. Protectionism such as this allows inefficient refineries to continue to operate within the United States, while competitors are prevented from importing gas at market prices. From the consumers’ perspective, the extra one cent on the gallon translates into 42 cents on the barrel, and at 20 million barrels per day the American consumer spends an extra $8.4 million each day to support domestic refineries.
The best book on the topic: $15
Further complicating the importation of refined gas is America’s obstinate application of environmental restrictions to foreign countries. Venezuela has filed complaints with the World trade Organization several times over Congress’s and the EPA’s requirements for cleaner refining. America, Venezuela charges, studied her own refineries, decided a 15% decrease in emissions was necessary, and then required Venezuela to do the same, without examining the emissions of Venezuelan refineries. This global application of EPA requirements is Congress’s peace offering to domestic refineries after requiring them to meet stringent clean air requirements, and the tab of course is being picked up by every consumer of gasoline in America.
“More gasoline, less asphalt.” Yeah, but we need asphalt too. If you search Google News on Asphalt Prices, you’ll find lots of stories like this one::
In 1976, the last year a new refinery was built domestic crude oil production was 8.13 million barrels . Last year production was 5.12 million barrels, or almost 40% lower.
Moreover, domestic oil production is unlikely to increase although if we got a high enough price we might be able to stabilize oil output. But at that price consumption probably would also fall.
So my question is why do we need a new oil refinery?
What will they refine?
Moreover, the countries with large oil production capacity are expanding their refining capacity and
with access to lower or at least no more expensive oil owned by the same government that owns the new refineries why would a domestic refiner ever expect to compete with foreign refiners on price?
Finally, it is more efficient to import the refined product rather then crude oil.
So again, why do we need new refineries?
Isn’t the market sending the correct signal through poor refining margins that we do not need new refineries?
Spencer, the signals in Yuma, Arizona are being delivered not by the market but instead through the U.S. District Court.
So again, why do we need new refineries?
Because there’s not one gasoline standard nationwide. Gasoline for Chicago can’t be sold in Milwaukee. Milwaukee gas can’t be sold in Green Bay. St. Louis gas can’t be sold in Kansas City.
The “boutique blends” problem is maddening. Once again, the EPA is screwing up the market for gasoline.
I don’t know how you expand gasoline imports yet still deal with boutique blends.
Does anybody know about the new bill in Congress to have the FTC go after price gouging by retailers and refiners? I just had a newspaperman calling me up to ask about it. Does it include proposals for outright price caps or limits on price increases? Apparently the Competitive Enterprise Institute (an outfit that has made itself look silly on the global warming issue) has criticized this bill by claiming it will produce lines at stations like in 1979. But I do not see that happening unless there are actual caps or limits on price increases, being in this area a nice, conventional economist.
Buzzcut says: The “boutique blends” problem is maddening. Once again, the EPA is screwing up the market for gasoline.
The EPA isn’t responsible for boutique fuels except in the sense that it is being irresponsible. Boutique fuels are the creation of the individual states who are acting in the absence of leadership on the national level to regulate clean air and fuel standards.
And the refiners are hardly complaining. As Chakravorty and Nauges demonstrated:
“These fuels are costly to produce, but they also segment the market and increase the market power of refiners…. we find that both cost and market segmentation significantly affect wholesale gasoline prices.”
The lack of market competition created by boutique fuels and especially for imported gasoline creates a windfall for the refiners and that is why you don’t see any effort to change it. The Cheney lobby likes it just the way it is.
James,
So I’m sure you wouldn’t mind if Exxon built a small refinery on your property then.
Joseph,
You are right about the boutique fuels. The refineries love them. But you are wrong as to who supports them. The Democrats, federal, state and local, are the ones who push all of the costly environmental issues. It is their old protection racket (and why we have so many lobbyists in Washington DC). Businesses know that if they play the Democrat game then they will be protected from competition, but if they choose not to play they will get slammed with taxes and regulations.
Business likes Democrats a lot more than Republicans because you can’t judge what a Republican will do. With a Democrat all you have to do is grease his palm and he will be your friend.
Estefana,
If you know anyone at Exxon tell them I would gladly lease them my backyard for a refinery.
Stuart Staniford, you seem to know a lot about energy so I would like to ask if you agree with Harvard University professor Jeffrey Frankel that low real interest rates contribute to the high real prices of oil (and other commodities). Here is his op-ed in the Financial Times:
http://www.ksg.harvard.edu/ksgnews/Features/opeds/041505_frankel.htm
and here is his paper on the subject:
http://www.nber.org/books/assetprices/frankel11-28-06.pdf
Barkley Rosser, if you go to bloomberg.com and search “price gouging” in the news then you should be able to find what you’re looking for if you then order the results by date rather than by relevance. The only thing I heard about this legislation is that price gouging is very difficult to prove.
JDH — they had complete permission to build a new refinery in AZ years ago if they were willing to meet the clean air requirements. They turned that down.
So who is responsible for there not being a new refinery in AZ?
OK. We have an externatilty called air pollution.
This is a fact. The free market does not provide modern US society with clean air. It requires
regulation to get clean air. There is nothing wrong with that. It is called internalizing an
externality. It is the only way I can get clean
air and I’m ready to pay more for gas to offset the higher cost. So who is responsible for the lack of a new refinery in AZ. I claim it is the firm that refuses to obey the clean air law, not the political system that passed the law.
Spencer, my understanding is that ACF gave up on Maricopa County not because their plans were in violation of existing law, but because they judged as too high the risk that the existing law there would be changed ex post after they had the refinery all built to satisfy existing regulations.
And I disagree that our present system of judicial review is the only, or even an acceptable, way to address externalities. Instead it looks to me like a random and inherently unpredictable penalty process that makes it incredibly costly to try to build a new refinery anywhere, with any plan, under any conditions.
Let me clarify exactly what I mean by that in terms of an objective, predictive test. Do you think this cultural artifacts issue will be the last court case that will bring significant delays and additional costs to the project? I am very much of the opinion that there are many more like this to come. Do you know what the basis will be for the next three lawsuits against the project? I claim that neither I, nor you, nor the company, have any way of knowing the answer. That, to me, is a very unsatisfactory system, for which we are reaping the rewards.
If we had a system that clearly spelled out exactly what a firm has to do and how they should do it, and then left them free to implement the project, I would be very enthusiastic about it. That is precisely what I am recommending that we need to replace the status quo.
JDH wrote: “And I disagree that our present system of judicial review is the only, or even an acceptable, way to address externalities”
and
“If we had a system that clearly spelled out exactly what a firm has to do and how they should do it, and then left them free to implement the project…”
These are both good points, but many questions are raised by them. Who decides what a firm will do and how it should do it? A panel of experts? Certainly we live in what could be considered a technocracy. Genetic engineering of plants, for example. Who decides that it’s ok to release them into the environment? There are issues that need to be considered.
In the Soviet Union, the people had no voice in what went where. In a truly libertarian society, the people have no voice either. They can choose not to purchase fuel–or try not to–from the refinery that is built in their backyard, but they have little or no voice or say over what happens on the other side of the fence.
How much damage is our current systems costing us? How bad is it compared to the price paid for open air nuclear testing and/or the soviet union’s despoilation of the environment.
Whether NIMBY or not, the system is speaking, the people are speaking–they pick the politicians and they pick the judges–and gas prices may be higher as a result. They may not be optimal economically speaking, but that doesn’t matter. Economists don’t run the world. People do–or should, in some way. And economics doesn’t guide all decisions.
I agree that the floor should not be pulled out from a project–the rules changed–once major funds are spent. But I think the expectation should be that millions will be spent on the legal process before major development funds are spent.
Companies are suing each other constantly over property rights, interpretation of property rights, etc. This example of the refinery is just a particular instance of the collision of property rights in a democracy with libertarian tendencies. I have a friend who makes a living cleaning up chemical plants in Los Angeles–the rules are a nightmare. But the mess left behind by the unregulated plants is also a nightmare.
Sometimes we have to pick the lesser evil. I’m just not convinced that the example of this startup refinery is an example of our inability to build refining capacity. It just seems like the majors did not care to increase capacity.
And it’s not just judges who impact plans. As seen on EnergyBulletin:
Bloomberg News via IHT
SAN FRANCISCO: Royal Dutch Shell, the biggest European oil company, may shelve a joint venture plan to create the largest U.S. refinery because of President George W. Bush’s efforts to reduce gasoline use, a Shell executive said Monday.
“If you’re an investor getting ready to put several billion dollars into expanded capacity, would you do that when the president himself says we want less gasoline?” John Hofmeister, Shell’s top U.S. executive, said at a conference in Santa Clara, California.
At stake is a $3 billion plan by Shell and Saudi Arabia’s state oil company, partners in the Motiva Enterprises venture, to more than double the processing capacity of a refinery in Port Arthur, Texas, to 600,000 barrels of crude a day. Bush called in January for the country to increase use of renewable and alternative fuels to curb reliance on imported oil, seeking a 20 percent reduction in gasoline use by 2017.
JDH wrote:
Let me clarify exactly what I mean by that in terms of an objective, predictive test. Do you think this cultural artifacts issue will be the last court case that will bring significant delays and additional costs to the project? I am very much of the opinion that there are many more like this to come. Do you know what the basis will be for the next three lawsuits against the project? I claim that neither I, nor you, nor the company, have any way of knowing the answer. That, to me, is a very unsatisfactory system, for which we are reaping the rewards.
If we had a system that clearly spelled out exactly what a firm has to do and how they should do it, and then left them free to implement the project, I would be very enthusiastic about it. That is precisely what I am recommending that we need to replace the status quo.
Professor,
This is a political issue. We have elevated environmental concerns to the level that almost any project can be stopped due to some environmental lawsuit. For your recommendation to be effective we will need to totally change our approach to government control of environmental issues. Most of these lawsuits have virtually nothing to do with environmental damage and everything to do with preventing business expansion. Radical environmentalists are contemporary Luddites.
It is also, unfortunately, a politicised environment, where any environmental concern can be painted as extreme, fringe, wacko, …
For your recommendation to be effective we will need to totally change our approach to environmental issues … a little more “Reason” to borrow from one book title, and a little less talk-radio rhetoric.
Regarding boutique fuels, my only point is that they balkanize the market and make it much more difficult to import gasoline.
Any environmental cost/ benefit analysis would show that the differences between the various boutique fuels make almost no difference in emissions, and drive up costs considerably.
But then again, in terms of clean air, ethanol does absolutely nothing to clean up the emissions of fuel injected automobiles, which every car since about 1991 has had. That hasn’t stopped politicians from greatly expanding the use of ethanol in fuels.
My only point is that when scumbags like Rahm Emanuel start pointing fingers at refiners for these costs, maybe they need to take a look in the mirror and examine their own legislation for root cause.
OK Buzz, you have experience, and I am only a guy with a rusty chem degree.
How complicated is “blending”? Do the blends have (as I would guess) a very high share of common components? I’d guess the bulk would be “gasoline hydrocarbons” and then much smaller fractions of designated additives.
How hard is it to switch a plant from “blend a” to “blend b?”
I’m picturing the paint-mixing machine at home-depot and wondering why blending can’t be as the gas hits the truck or pipleline.
I am prepared to be “schooled” 🙂
odograph,
I am surprised at your lack of understand concerning start ups and set up costs. Perhaps you should get a summer job in a manufacturing plant.
Just in downtime alone every change in production loses money. Consider the guy at Home Depot being paid, not by the number of cans he mixes, but by the time the machine is in operation. Do you think he will make more money mixing 10 small cans for 30 min each or 1 large can for 5 hours? Do you think a refinery will produce more having to shut down and set up for 10 different blends or running constantly making one blend?
Strange. My local Home Depot doesn’t have a refinery in the paint department. Learn something new every day. Yup.
In the past, the big hitters in the blends were the requirement for oxygenates, either MTBE or ethanol. The midwest blends used ethanol, the coasts used MTBE.
Now MTBE has been phased out by the EPA as a possible carcinogen or some such nonsense. So the number of different blends has decreased a little bit (Illinois has gone from 4 blends to 3, for example).
The big difference right now is the requirement for oxygenates like ethanol. Some areas that have smog problems require the oxygenates. Areas with little smog don’t require the oxygenates.
What the differences beyond that are, I can’t say.
Can a refinery from, say, Michigan make an Illinois blend? Sure, with some capital thrown at it. But once the gas is blended for Illinois, or Michigan, it can’t be re-blended, or sold in another market.
Actually, the areas that switched from MTBE to ethanol are screwed. There’s no ethanol infrastructure in California or New Jersey. They had to start from scratch in that regard. And all the capital equipment used to make MTBE was scrap. So I wouldn’t be surprised if some of their cost difference relative to the Midwest is ethanol related.
The first two of you missed the paint machine that takes a single majority component (white paint) and adds minority components (pigments) to make a final blend. You don’t need to tear down that machine to change from bluish white paint to greenish white paint. For that, it is a metaphor for a “flexible” composition system.
Getting to Buzzcut, and oxygenates, it might still look simple, if the bulk component (the analog to “white paint”) can be produced by the refinery hardware, and the additive (analogous to “pigment”) can be kept on hand at not to high a cost.
Now, the thing that would break this would be if the bulk component, or other major components, must be made differently on-site for the various blends.
“Can a refinery from, say, Michigan make an Illinois blend? Sure, with some capital thrown at it. But once the gas is blended for Illinois, or Michigan, it can’t be re-blended, or sold in another market.”
… which makes me suspect a pipeline problem more than a refinery problem? Even if the paint machine (I say that for the guys who hate the paint machine) can produce blue, putting in pipe full of green paint doesn’t do you much good. (?)
gasoline intended for ethanol reformulation requires a unique blendstock known in the trade as “RBOB.” That’s because ethanol evaporates easily and unburned evaporated fuel is a major contributor to smog. Gasoline intended for ethanol blending must, accordingly, be specially made in order to minimize ethanol evaporation rates.
Because of RBOB’s unique characteristics, it must be segregated from other gasoline all the way up the transportation system until the point just before it is mingled with ethanol and delivered to the service station. Accordingly, it cannot move through normal distribution channels and requires an entirely separate, dedicated transportation network.
This congressionally mandated balkanization of the gasoline market has seriously hampered the flexibility that refiners would otherwise have to react to spot shortages (and the related opportunity for profit making). Because it is inefficient to segment refining operations to produce multiple fuel blends, refiners generally dedicate their facilities to the production of one particular gasoline blend. Going into the spring, most of the RBOB for the Milwaukee/Chicago market was produced by six refineries in Illinois. Unfortunately, shifting production from one blend to another is costly and time consuming. Accordingly, refiners cannot react quickly to profit-making opportunities.
Ah, just saw the 12:16 comment.
Thanks Buzzcut, that’s what I thought could break my analogy. In other words, the core component, the “white paint” much change.
Please, refinary use is cutback so Oil companies CAN increase profit use during a time of transition. We are watching it in action right now. Why sell gas at 2.50 when you can at 3.50?
Trust me, if you want true environmental change, building more refinaries does little good. The fact is Oil companies are themselves are leaving Oil in 10 years shows this. Hence, building more refinaries is a waste of resources.
“Royal Dutch Shell, the biggest European oil company, may shelve a joint venture plan to create the largest U.S. refinery because of President George W. Bush’s efforts to reduce gasoline use, a Shell executive said Monday”
They are also a company that will be defunct in 10 years. They aren’t getting it. The weak die, the strong survive.
JDH,
Would you care to clarify why when for almost everything else govt. can do, you decry “let the markets handle it”, but when it comes to helping massively profitable, publicly subsidized energy companies, you can’t have the govt. step in fast enough?
I’m completely baffled by your question and your perspective, Stef. It sounds like you want to summarize every issue with a bumper sticker, and then ask me to defend your characterization. In what sense would stopping construction through a lawsuit like this one be described as “letting the market handle it?”
I can only answer, I do not accept the validity of the bumper stickers you’re using to summarize either this issue or my world view.
I do have a general presumption that if there is a perceived mutually advantageous exchange (i.e., the buyer sees it as in his interest to buy, and the seller sees it as in his interest to sell), the government ought to allow that exchange to take place, unless there is a clear and compelling reason not to. In the present instance, that principle would say that if Arizona Clean Fuels wants to sell gasoline for $3.07 a gallon and I would like to buy it, the government is acting contrary to society’s best interests if it denies ACF the opportunity to sell and forces me instead to buy from ExxonMobil for $3.16 a gallon.
This paint analogy is all good and well, but one thing. Forget the white. True, anything goes with white, but my broker tells me to buy the gold paint. I’ve got five gallon cans of it stacked up all over the place, under the kids beds, and some burried in the back yard. It’s a great hedge againts inflation and, when the world ends after the fiat monetary system collapses and everyone else is starving, I’ll–well, I’ll paint my house gold.
So there.
T.R.,
My only guess is that your broker is one of those fly by night infomercial talking heads selling gold coins. You would do much better investing in the paint factory than in gold paint. But no foundation to the fiat currency you better hurry because the government will soon inflate like crazy.