Here's a Big Surprise...

The UK Telegraph reports that under the oh-so-efficient socialism of Hugo Chavez, Venezuela's oil output has fallen by almost 25%. Making matters worse for Venezuela, Chavez's efforts to assist other struggling socialist states have placed the national economy at the hands of the one nation Chavez misses no opportunity to antagonize.

To win allies and forge an anti-American front, Mr Chavez sells oil to friendly countries at low prices. Ironically, the only big customer buying Venezuelan oil at the full market price is the United States, which the president routinely denounces as the "Empire".

"As production falls, the sales to the US become more important," said Pietro Donatello, an oil analyst from Latin Petroleum in the capital, Caracas. "Only the US is paying the full amount for Venezuelan oil and in cash, the rest are in some kind of barter agreements."

The state oil company, PDVSA, produced 3.2 million barrels per day in 1998, the year before Mr Chavez won the presidency. After a decade of rising corruption and inefficiency, daily output has now fallen to 2.4 million barrels, according to OPEC figures. About half of this oil is now delivered at a discount to Mr Chavez's friends around Latin America. The 18 nations in his "Petrocaribe" club, founded in 2005, pay Venezuela only 30 per cent of the market price within 90 days, with rest in instalments spread over 25 years.

The other half - 1.2 million barrels per day - goes to America, Venezuela's only genuinely paying customer.

Of course, one of the reasons PDVSA finds itself unable to reap the benefits of soaring oil prices on the world market is that Chavez insists on running the company as a welfare agency (as all socialists do with state-run enterprises).

Meanwhile, Mr Chavez has given PDVSA countless new tasks. "The new PDVSA is central to the social battle for the advance of our country," said Rafael Ramirez, the company's president and the minister for petroleum. "We have worked to convert PDVSA into a key element for the social battle."

The company now grows food after Mr Chavez's price controls emptied supermarket shelves of products like milk and eggs. Another branch produces furniture and domestic appliances in an effort to stem the flow of imports. What PDVSA seems unable to do is produce more oil.

Other problems abound, including the failure of the Chavez regime to properly invest in new infrastructure and equipment (but how could he, since he spends of much Venezuelan money aiding his socialist cronies abroad). With oil prices falling sharply, Chavez can no longer hide PDVSA's problems behind inflated petroleum prices, and the shaky house of cards one which he has built his socialist revolution is beginning to teeter.

All this means that Venezuela has missed much of the benefit from the oil boom and, now that prices are falling, Mr Chavez faces huge financial problems. Nobody is sure at what point his government would be unable to pay its bills, but most sources consulted believe this would probably happen if oil falls to $80 a barrel. Yesterday, oil was trading at $79.80.

Once that happens, Venezuela is likely to become a very nasty place.