Planet Money Explores The Value Of Crude Oil
ARI SHAPIRO, HOST:
We're going to listen in now on what might be the most awkward negotiation in the history of the oil business. Robert Smith and Stacey Vanek Smith of our Planet Money podcast drove to a field in the Midwest with a briefcase full of a hundred dollar bills. They thought the best way to understand the oil business is to get into the oil business - buying it, transporting it and refining it.
As we heard on MORNING EDITION, to get the legal standing to do that took months of paperwork. Once they had the green light, Robert and Stacey had to set their price.
STACEY VANEK SMITH, BYLINE: Our crude oil has been waiting for this moment for millions of years underneath what is now a cow pasture in Kansas.
ROBERT SMITH, BYLINE: That's where we meet up with Jason Bruns in that cow pasture. He's the man pumping the oil into a big, black tank.
(SOUNDBITE OF OIL PUMP JACK CHURNING)
VANEK SMITH: Oh, that's deep. Can you yell something down there?
JASON BRUNS: Hello (echoing).
VANEK SMITH: He says there's oil down there, and it seems legit. But we don't know yet how much it's worth.
SMITH: It always seems like there's one price for oil that goes up and down.
VANEK SMITH: But every individual oil deal is different. Jason makes a pitch that his oil is worth more.
BRUNS: It's sweet oil. It's good oil. It's light oil. It's not thick. It's not heavy-crude. It's the sweet-crude - what people want.
SMITH: That means it's easier to refine into gasoline. Less work for the refinery means it should fetch a higher price.
VANEK SMITH: And then there was the matter of transportation. It's hard to truck crude oil, so the closer to the refinery, the higher the price. Jason says this oil is mere miles from the big pipelines of Oklahoma.
BRUNS: The more southern Kansas you are, the sweeter your crude is, the more they pay.
VANEK SMITH: So it's like location, location, location.
SMITH: Now, on the way over here, we had heard on the radio that oil was selling worldwide for $40 a barrel. But Jason - he pulls out his phone, and he shows us a long list of what oil's been fetching around these parts.
BRUNS: Oklahoma Sweet - that's our column. Right now the average on Oklahoma Sweet is $41.83 for the month.
VANEK SMITH: I thought it was Kansas Sweet, though.
SMITH: Yeah, we are in Kansas. Are you pulling a fast one on us?
BRUNS: Yeah, we are in Kansas.
VANEK SMITH: Why should we pay Oklahoma Sweet prices?
BRUNS: Because that's what the other oil trucks that will come, if you don't get it, will pay me (laughter).
SMITH: I pull up another list of prices lower than Jason's prices on my phone. And then he makes a counteroffer.
BRUNS: Forty-one-eighty probably.
SMITH: Well, you just knocked three cents - (laughter) he just knocked three cents off of that.
BRUNS: (Laughter) I feel you. I mean that's kind of what I was thinking.
VANEK SMITH: We did offer to throw in lunch.
SMITH: And I bring out our secret weapon. I open up a black briefcase. And I show him what's inside.
BRUNS: Oh, yeah - cash money - yeah (laughter).
VANEK SMITH: In one hundred dollar bills - Jason is beaming, and he agrees to $40 a barrel.
SMITH: One-hundred barrels - almost enough to fill a tanker truck.
Let's do the handshake - all right.
BRUNS: All right - deal.
VANEK SMITH: That was, like, a $4,000 handshake.
BRUNS: I mean, not that I don't trust, but let me count this. It'll be all right (laughter).
SMITH: Now, there are taxes to be paid. There will be paperwork.
VANEK SMITH: Lots of paperwork.
SMITH: But essentially Planet Money, NPR now owns a truck full of oil.
VANEK SMITH: Now we just have to figure out a way to get it out of here. That's the next episode. Stacey Vanek Smith...
SMITH: And Robert Smith, NPR News, outside Wellington, Kan.
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