Is Chavez Taking Too Many Oil Risks?

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Venezuela's 26 million people have seen four straight years of near record economic growth, and they are driving up domestic oil demand: almost 500,000 new cars are expected to be sold this year. (Why not, with gas at 12¢ a gal.?) But the bolívar is sharply overvalued, inflation is the highest in Latin America, and even Chávez fears that his "21st century socialists" are living like capitalist nouveaux riches, the so-called boli-bourgeoisie.

For now, "Chávez can keep raking in tons of cash without expanding production--even with production declining," says David Mares, an oil-politics expert at the University of California at San Diego. "He's taking advantage of the situation we consumers dropped in his lap." Mares says Chávez has to invest more in his oil industry in the future. Although it also wouldn't hurt if Americans learned to consume less oil.