here is why Chavez is RUNNING OUT OF GAS.

Thom Walker

Thom Walker says Venezuela’s firebrand socialist leader has used oil revenues to buy allies and promote social reforms – but not to invest in the future of his country’s productive economy

As the pillars of the world’s financial system have tumbled, few of us find any solace in what has happened. One exception is Venezuela’s President Hugo Chávez, who saw the initial collapse of world markets as a sign that maybe he had been right all along, and even claimed an unlikely new friend in the process.

Speaking at a conference of intellectuals in October, the self-styled socialist leader called his long-time foe George W. Bush a ‘comrade’, following the US Congress’s decision to pass the $700 billion rescue plan. ‘You see,’ Chávez chuckled, ‘he’s to the left of me now.’

Soon after the start of the economic crisis, Chávez triumphed in the ‘collapse of the US model of capitalism’, proudly extolling Venezuela’s safety – thanks to state control of major industries – from the perils which beset the rest of the world. But the initial glee of el comandante may be short-lived as oil prices continue to decline, and Venezuela, a country that depends on oil for 50 per cent of government revenue and 95 per cent of export earnings, may in reality be looking as precarious as ever.

‘The drop in oil prices is going to be devastating for Venezuela,’ says José Toro Hardy, an economist and former board member of state oil company Petróleos de Venezuela S.A. (PDVSA). ‘We’re heading towards a very difficult economic climate, which will have a grave social impact.’

Many analysts are predicting the worst for this Opec-member nation, and even Finance Minister Ali Rodriguez told reporters recently that in the light of falling oil prices, 2009’s budget would ‘have significant restrictions’ and require austerity measures – a major shift given the government’s liberal attitude to spending in recent years. Chávez himself admits, ‘The fall in oil prices due to the current global financial crisis may have a negative influence on the economy of Venezuela,’ adding, ‘This catastrophe will affect everyone. One cannot hide from it, it will cover everyone like an ocean wave.’