Venezuela's oil output slumps under Hugo Chavez
Venezuela's daily oil production has fallen by a quarter since President Hugo Chavez won power, depriving his "Bolivarian Revolution" of much of the benefit of the global boom in oil prices.
To win allies and forge an anti-American front, Mr Chavez sells oil to friendly countries at low prices. Ironically, the only big customer buying Venezuelan oil at the full market price is the United States, which the president routinely denounces as the "Empire".
"As production falls, the sales to the US become more important," said Pietro Donatello, an oil analyst from Latin Petroleum in the capital, Caracas. "Only the US is paying the full amount for Venezuelan oil and in cash, the rest are in some kind of barter agreements."
The state oil company, PDVSA, produced 3.2 million barrels per day in 1998, the year before Mr Chavez won the presidency. After a decade of rising corruption and inefficiency, daily output has now fallen to 2.4 million barrels, according to OPEC figures. About half of this oil is now delivered at a discount to Mr Chavez's friends around Latin America. The 18 nations in his "Petrocaribe" club, founded in 2005, pay Venezuela only 30 per cent of the market price within 90 days, with rest in instalments spread over 25 years.
The other half - 1.2 million barrels per day - goes to America, Venezuela's only genuinely paying customer.
Meanwhile, Mr Chavez has given PDVSA countless new tasks. "The new PDVSA is central to the social battle for the advance of our country," said Rafael Ramirez, the company's president and the minister for petroleum. "We have worked to convert PDVSA into a key element for the social battle."
The company now grows food after Mr Chavez's price controls emptied supermarket shelves of products like milk and eggs. Another branch produces furniture and domestic appliances in an effort to stem the flow of imports. What PDVSA seems unable to do is produce more oil.
Venezuela has proven reserves of 80 billion barrels, but estimates suggest that it may possess 142 billion barrels - more than anywhere else except Saudi Arabia. But the crude is of low quality and must be upgraded before it can be shipped. There are only three upgrade units currently operating, processing only 600,000 barrels per day.
"There is a bottleneck in the Venezuelan production system," said Mazhar al-Sheridah, 68, an oil expert at the Central University of Venezuela. "It will cost at least $32 billion to build another three upgrading units and take some five years, meaning that Venezuelan production is stuck at current levels for a while yet."
All this means that Venezuela has missed much of the benefit from the oil boom and, now that prices are falling, Mr Chavez faces huge financial problems. Nobody is sure at what point his government would be unable to pay its bills, but most sources consulted believe this would probably happen if oil falls to $80 a barrel. Yesterday, oil was trading at $79.80.