Red Oil

Chávez's current term is until 2013 and on February 15th 2009 he hopes to win a referendum that would remove all political term limits, a first step to realising his 'modest' ambition to remain in power until at least 2030.

However, analysts warn that the end of the oil price boom may spell doom for Chávez and his populist policies.

Chávez's supporters claim he has already transformed his country for the better by empowering the poorer and darker-skinned among its citizens, who had sometimes felt their country had been cursed, not blessed, by the crude oils and asphalts that have seeped up through the ground for centuries. Venezuela's traditional ruling classes, whom Chávez has called 'the rancid oligarchy', have siphoned off revenues vulnerable to global price swings while failing to diversify the economy or address chronic poverty.

The indigenous people of Venezuela had already encountered oil before the Spanish conquistadors arrived in 1499, using the thick black liquid primarily for medicinal purposes, lighting, and for the caulking of canoes. Upon arrival in the early 1500s, the Spanish conquerors learned from the indigenous people to use the naturally occurring hydrocarbons for caulking their ships as well, and for treating their weapons.

Despite this local knowledge, the first significant oil wells were not drilled until the early 1910s. As the word spread internationally of Venezuela's oil potential, representatives of large foreign companies came to the country and started lobbying then president Juan Vicente Gómez for rights of exploration and exploitation. Gómez began to grant huge concessions to family and friends and the Venezuelan concessionaires leased or sold their holdings to the highest foreign bidders.

A 1970s oil boom largely benefited the middle classes, but a subsequent price collapse condemned many of this class to poverty while eroding the living standards of the already impoverished. The country officially nationalized its oil industry in 1976, and Petróleos de Venezuela S.A. (PDVSA), the Venezuelan state-owned petroleum company was born.

It now owns around $100 billion in assets worldwide, including refineries in the United States, the Caribbean and Europe. PDVSA, which has raked in up to $90bn a year in recent years, has been required by Chávez to divert part of its investment budget to social spending, including free health care staffed with 10,000 Cuban doctors, subsidised food and land reform.