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As energy prices hit historic highs, film studios have been forced to shoulder higher production costs.

But the fuel spike does not spell bad news for everyone in the industry; for some, it is actually a boon.

And for the global industry, economists say that, despite some mixed signals, there is some evidence to support the truism that higher fuel prices boost box office sales by prompting consumers to opt for the local multiplex over longer trips.

A certain kind of film financier has been the most obvious beneficiary of the recent spikes. For instance, Leomax Entertainment, a Los Angeles- and Berlin-based financing and production banner, has found that the jump in oil prices has opened up its financing options.

The company has created a five-year slate using money from an oil-based hedge fund - one of its current projects is a thriller called Short Cut from Adam Sandler's production company - and found financing relatively easier to come by.

"If you need to shelter windfall profits, there's really no better place than the movie business," Leomax boss Ingo Volkammer said.

Basically, that's because tax laws in some countries require that windfall profits are taxed heavily unless the money is quickly invested in an intangible asset like film.

That has prompted oil investors to look more favourably on the film biz - any film, really - because it means that even if a movie loses 30 per cent of its money, investors still come out on top because those losses pale compared with what a government might have taken.

Box office

But the greatest potential upside to oil and fuel price increases lies with ticket sales at the box office.

Economists have long debated how much of a factor petrol prices are on movie attendance.

While there are data showing both sides - and experts say any connection is at best correlated, not causal - several pivotal years of box office growth during the past several decades did come at times of high oil prices.

In 1981 and 1982, for example, oil prices rose roughly 30 per cent and then 10 per cent year-over-year; in that same period, the global box office saw sizeable increases of 8 per cent, then 16 per cent.

In years when oil prices were roughly flat, like 1992, box office rose only 1 per cent.

Other years, however, show little correlation: 2005's notorious 6 per cent drop in box office came when oil prices actually had risen more than 25 per cent.

Economists say oil prices may not so much cause a box office spike as provide a cushion; where other industries see dips in times of recession and high gas prices, the movie industry can stay closer to flat, as the number of people switching to low-cost options like moviegoing offsets the consumers who choose not to spend at all.

University of Michigan economist Paul Edelstein, who co-authored a paper last year titled Retail Energy Prices and Consumer Expenditures, said that even though in his study consumption of events such as live theatre and spectator sports went down during a period of high fuel prices, there was "a positive response" - albeit a small one - for movie tickets.

"It's a low-cost option, so it's conceivable that in the aggregate, the movies don't feel as much pain," he said.

- Reuters/Hollywood Reporter

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