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Fortunes shift as prices soar

Millionaires are created in Moscow but French fishermen riot over lost profit as effects ripple around the globe.

November 24, 2007|Kim Murphy; Sergei Loiko; Dawn C. Chmielewski; Christian Berthelsen; Usama Redha; Borzou Daragahi; Batsheva Sobelman; Chris Kraul; Achrene Sicakyuz

Oil makes the world go 'round. Each day, more than 85 million barrels of black gold are pumped from the ground -- that's nearly 70 ounces for each of the 6.6 billion men, women and children on Earth.

Since January, the price of a barrel of oil has almost doubled and is now approaching $100. Blame tensions in the Middle East, speculators on a quest for profit and the hunger for energy of rising powers, including India and China.

The ripples from this price surge are washing up on every shore. It's creating new wealth in such locales as Moscow, where oil barons are almost at a loss about how to spend their riches. But the effects in some other places are less predictable. Israelis fear a rush of people will chop down trees to heat their homes. Farmers in northern Iraq are abandoning their fields to sell gas. Fishermen in France, stung by the price of diesel, have rioted.

As Californians cope with gasoline near $3.50 a gallon and other Americans brace for a winter of high heating bills, we asked Times correspondents how the skyrocketing prices are affecting their corner of the world. Here's what they found.


Helping oil barons spend their wealth

What do you buy when you can have anything? At the Millionaire Fair, which opened Thursday at a sprawling exhibition center in northwest Moscow, Yelena Kudozova is trying to provide suggestions -- a lot of them, since 45,000 people with fistfuls of cash are expected to cross the red carpet over the exhibition's four days. Many are getting rich thanks to oil.

Last year, there was a private island for sale, yachts and helicopters, baby bottles made of gold and a dress sewn entirely from dollar bills. This year, the fair's 35,000 square feet of exhibition space will feature diamond-encrusted USB flash drives; two Kandinsky paintings never before exhibited in Russia; and a sneak peek at Volvo's new XC60 concept car with its six-cylinder, 3.2-liter ethanol engine (after all, gas here has risen to the unheard-of price of $3.26 a gallon).

"It is really symbolic that the time when oil prices are about to reach $100 a barrel coincides with our fair," said Kudozova, the event's director. "Russia is growing more and more influential, and it consumes more and more luxury. I can't even imagine such a fair to be held, for instance, in 1991 Russia. A Millionaire Fair in Russia at that time would have been an oxymoron!"

High oil prices helped produce a bumper crop of billionaires in Russia this year -- 53 to be precise, according to Forbes magazine, compared with 34 in 2006 -- not to mention the country's 103,000-plus millionaires. The oil business was a key component in the fortunes of at least 16 of those billionaires, Forbes said.

Russia's oil and gas revenues have quadrupled since 1998. Oil export revenue this year is likely to reach $63.9 billion, lubricating not only the oil tycoons but also many other businesses, including retail, services, construction and real estate.

Kudozova had no problem filling up the fair's gala opening night. The 15,000 tickets for the event, priced at $742 apiece, sold out.

Attendees at opening night were treated to shows by the Italian fashion house Giancarlo Ferre and Bond Street jewelry designer David Morris, performances by the Blue Man Group and pop music artist Sergei Mazayev, and all the Piper-Heidsieck Champagne they could drink, which is to say, thank you very much, quite a lot.

-- Kim Murphy and Sergei Loiko



Tour operators try to cut fuel costs

Rising oil prices are making waves for tour boat operators who ply Shanghai's historic Bund waterfront.

At Touring the Huang Pu River Co., sales and marketing manager Feng Haiping is struggling to cut fuel costs for his 18-boat fleet, which conveys as many as 5,000 sightseers on a typical day -- and burns through as much as $865 in diesel fuel an hour. This month, government regulators hiked wholesale gasoline and diesel prices 10%.

Competition among tour operators is fierce, so the company can't raise the price of tickets, which sell for $6.70 to $26.80 depending on the vessel, to pay for more expensive fuel, Feng said. Instead, the company has made other adjustments, such as reducing from two to one the number of trips its new red-and-gold, 187-foot Dragon Boat luxury cruise liner makes each day.

The company also plans to boost the rate it charges for private charters, and it is paying closer attention to vessel maintenance, Feng said. Captains have been trained to operate the boats for maximum fuel efficiency and to choose the most direct routes while traveling along the river, past landmarks from the colonial era and the Oriental Pearl TV tower, one of China's modern icons.

Higher prices at the pumps, together with the cost of parking in the popular tourist zone, have also prompted Feng to make changes in his personal life. Now, he drives to work only on weekends.

Most days, Feng said, "I take the bus."

-- Dawn C. Chmielewski



Taxi driver sees little benefit

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