How Hugo Chavez Has Primed the Gas Pump

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Pro-Chavez graffiti decorates a wall near the building housing Venezuela's national oil company, PDVSA, in Caracas May 31, 2006.

When most Americans think of the Organization of Petroleum Exporting Countries — OPEC, the world's most powerful energy cartel — they usually envision Arab sheikhs lording over oil drills in the desert. But the organization's more important home today arguably lies half a world away among the lush hills and beaches of Venezuela, which has the hemisphere's largest oil reserves.

Since leftist President Hugo Chávez began convincing the cartel's 11 member nations (of which Venezuela is a founder) to rein in world oil supply again after he took office in 1999, the price of crude has lept from less than $10 per barrel to a record $70-plus today. So Chávez is using the occasion of hosting a major OPEC meeting this week to trumpet the new mojo he's helped give OPEC — as well as to lobby to bring oil-producing neighbors like Ecuador into OPEC. "This OPEC meeting holds a lot of meaning for us," says Chávez's Energy Minister, Rafael Ramírez. "It's a celebration of the realization of our policies."

In an interview with TIME last week in Bolivia, where Venezuela is aiding the oil and natural-gas nationalization decreed this month by leftist President Evo Morales, Ramírez affirmed that he and Chávez will again call on OPEC to curtail oil production. The reason, he insisted, is to keep prices at "simply the fair market level for our most important natural resource," which now generates $83 billion per year for Venezuela compared to $53 billion in 2000. OPEC ministers will probably decline to cut back output much, if at all, especially since the record revenues they're enjoying would make it a difficult public relations feat. Still, Ramírez says he doubts the cartel will ever again allow prices to sink as low, or outputs to rise as high, as they did at the end of the 20th century, when Venezuela was even considering dropping out of OPEC shortly before Chávez's election.

At that time, Venezuela was a robust ally of the U.S., but Chávez has taken a decidedly (and often stridently) more anti-Washington tack — even diverting some of his exports to China and India to help break his country's dependence on the market to the North. "The traditional lack of control over natural resources like oil" among developing nations like OPEC's, Ramírez says, "has done profound damage to our economies for too long. We've created a new, more active awareness about our energy sovereignty."

Some of Venezuela's supply reduction has resulted less from strategy than from political upheaval; a 2002-2003 strike by workers and managers at Venezuela's state-run oil monopoly who opposed Chávez didn't help, and and analysts believe that the fiery leader's recent actions to exert more state control over drilling projects has reduced investment. (Venezuela insists it is producing up to 3.5 million barrels a day, though many analysts put it at little over 2.5 million.) But the bottom line is that since 2000, the last time Chávez hosted an OPEC gathering, the cartel's daily output has increased by fewer than 2 million barrels to 28 million today — even as the exploding petro-appetite of emerging giants like China and India has put enormous new pressures on global oil supplies, and prices.

But Ramírez, widely recognized as one of OPEC's most hawkish, and hard-working, energy ministers, insists Americans are committing "a gross simplification" if they want to blame Chávez for $3-a-gallon gasoline this summer. "Consumers, especially Americans, have to start taking their share of responsibility for this situation," says Ramírez, whose country is the U.S.'s fourth-largest foreign crude supplier. "The U.S.'s reckless oil consumption is turning into its own suicide. The Americans have a lot of work ahead of them with regard to energy policy." At the same time, he adds, "Americans should remember that when your Congress asked the international oil companies last fall to step up and provide subsidized heating fuel oil to poor residents in the U.S., only Citgo" — the oil firm owned by the Venezuelan government — "did so, despite the enormous profits the U.S. oil companies are making today."

Venezuela may have another reason to celebrate at this week's meeting, which will be held on Thursday before Chávez takes OPEC delegates to El Salto Angel, the world's highest waterfall, in southeast Venezuela. The country, which has about 78 billion barrels of proven crude reserves, also sits atop an estimated 275 billion barrels of heavy crude, which new technology has allowed to become more refinable and, as a result, a more legitimate addition to a nation's reserves. Should OPEC ratify Venezuela's heavy crude as bona fide reserves, the country would eclipse Saudi Arabia (260 billion barrels) as the global oil king. "Venezuela has never been this well positioned in the world," says Ramírez. Nor, it seems, has OPEC — and neither Ramírez nor Chávez are likely to let their Middle Eastern counterparts forget that it was Venezuela that helped pull the cartel out of the low-price desert.