With oil prices hovering above $55 a barrel, petroleum-rich Venezuela is awash with money. The windfall allows President Hugo Chavez to fund numerous social programs for the country's poor as well as gain influence throughout Latin America and the Caribbean by selling oil at concessionary prices. But the oil spigot may be running dry. Simon Marks reports from Lake Maracaibo, the center of Venezuela's oil patch.

Oil represents about three-quarters of Venezuela's export earnings and nearly half of government revenues. And Hugo Chavez is squeezing the state-owned oil company, PDVSA, to finance his goal of socialism for the 21st century.  The company has responsibilities to organize and pay for numerous social programs.                                 

Jose Pirela

The manager of one of the biggest fields on Lake Maracaibo, Jose Pirela, says after 90 years, oil is getting harder to extract. "We need help with technology from all countries."

But right now, Venezuelans are drenched in oil money and are enjoying every minute of it.

For example, car sales are up by 50 percent over last year. And gas costs the equivalent of 12 cents (U.S.) a liter.

Robert Bottome

It's this kind of consumer frenzy that worries financial analyst Robert Bottome. "We used to be importing $10-12 billion a year, we're now importing 30. Well, you can't sustain that. The day the price of oil settles to a more reasonable level, which I think is soon, we're just in trouble. There's no way of sustaining the consumption, there is no way of sustaining the illusion of growth."

But Venezuelan foreign minister Nicolas Maduro says the government does have contingency plans if oil prices drop. "Obviously, a fall in the price of oil would have a very serious consequence for our economy. But today we have a very strong position because we have strong national reserves, and we've created a National Investment Fund to save the money that is coming in as oil revenues. So if there were a collapse in oil prices -- and we don't foresee that in the next ten years -- Venezuela is prepared to continue our social investment. Spending won't be affected."

Bottome, American oil analysts, even OPEC say Venezuela is producing far less than the 3.3 million barrels a day it claims. And according to Bottome, the country is becoming ever-more dependent on oil. "The upshot is that where we had 11,000 industrial plants functioning here in 1998, we have under 5,000 now. If they're multinationals they've moved production to Colombia, to Costa Rica, to Brazil, to Mexico. And if they're Venezuelans then a lot of them have plain gone out of business." 

Perhaps that is why Venezuela is exploring deep in the interior of the country.   There may be as many as 300 billion barrels of oil in the Orinoco Basin. That would give Venezuela the world's biggest proven reserves. 

But the oil there is hard to extract, and expensive to refine and bring to market.  By itself, Venezuela probably can't afford the costs.

Nevertheless, at the end of February, Chavez nationalized the fields -- a move that has put foreign participation in the Orinoco in jeopardy.